Treasury Wine facing struggles ahead, warn analysts
Treasury Wine Estates is facing a series of challenges in the US and around the world as wine consumption slows and its rock star Penfolds label expects an earnings decline, analysts warn.
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Treasury Wine Estates shareholders could be nursing a sizeable hangover well into 2026, and possibly further, as the winemaker faces a slowdown in earnings for its luxury brand Penfolds, dwindling wine consumption in the US and weakness across its large portfolio of cheap, commercial bottles.
Analysts have also raised concerns about the winemaker’s decision in the face of these challenges – and especially because of pressure on its US earnings – to announce a share buyback, which could put even more stress on its balance sheet.
Treasury Wine, the maker of Penfolds, Pepperjack and Wolf Blass as well as owner of large Californian wineries DAOU and Frank Family Vineyards, on Tuesday unveiled a restructure of its commercial wine arm, warned of moderating growth for Penfolds, weaker demand in the US and unveiled its capital management strategy.
“We expect uncertainty to remain over Treasury’s outlook following a somewhat opaque update (Tuesday), despite the company’s best intentions,” Citi analyst Sam Teeger said in a note to clients.
Analysts had sought further details about the reason and quantum of weakened earnings for Penfolds – which generates almost 60 per cent of Treasury Wine’s earnings and is its most profitable division – from Treasury Wine chief executive Tim Ford and his management. In the investor update, the Penfolds earnings retreat for 2026 had been described as low to mid double-digit growth, revised from a previous target of up “approximately 15 per cent”.
“The Penfolds 2026 EBITS guidance downgrade was not surprising to us based on our recent Asia trip, however this would be the highest multiple part of Treasury Wine’s business,” Mr Teeger said, in a reference to the valuation ascribed by the sharemarket.
Mr Ford told analysts there was “some softness” for the top-tier of Penfolds, such as Grange and Bin 707, but pushed back on suggestions there was a structural problem with luxury wine or that a decline in Grange volumes was anything to be alarmed about.
“The company was somewhat dismissive of any suggestion that there are structural pressures facing luxury wine,” Mr Teeger said in his note, “and highlighted the weakness is in the sub-$US15-per-bottle category.”
He described the admission of US weakness and below target outlook as “disappointing, but also not surprising.”
The Citi analyst was also surprised by the share buyback, but was giving management and the board the benefit of the doubt.
“What was most surprising to us was the announcement of a share buyback given the direction of earnings, however we interpret this to be a sign that the board is comfortable that conditions won’t deteriorate further and do note the cash generative nature of the business.”
JP Morgan analyst Bryan Raymond underlined that Treasury Wine faced an “uncertain revenue and earnings outlook” across each of its divisions as Penfolds required incremental investment to drive Grange and Bin 707 range in China and US wine demand remained challenging, with shipments exceeding depletions.
The recent decision by Treasury Wine’s distributor in California to pull out of that market would likely drive further earnings downside in 2025, he added.
JP Morgan reduced its earnings forecasts for Treasury Wine’s Americas arm (down 5.7 per cent in 2026 and 6.2 per cent in 2027) and for Penfolds (down 3.8 per cent in 2026 and 5 per cent in 2027) following the update.
“We cut our 12-month target price from $11.50 to $10.20 reflecting further earnings risk, but maintain our ‘overweight’ given the current P/E discount,” he said.
However, Mr Raymond was more upbeat that Treasury Wine could overcome many of its problems.
“Treasury Wine Estates is facing challenging luxury and premium wine industry trends, but is proving relatively resilient. Americas is underperforming, given the declines in 19 Crimes, however, Penfolds remains one of the leading wine brands in the world, with strong resonance across Australia and Asia.”
Under the leadership of Mr Ford, Treasury Wine has bet big on the US market, agreeing to buy California’s DAOU Vineyards for as much as $US1bn in 2023 and purchasing Napa Valley’s Frank Family Vineyards for $US315m in late 2021.
Now, with US wine consumption slowing, it leaves Treasury Wine heavily exposed to that segment.
“Americas remains a source of weakness in the fiscal 2026 outlook, driven by DAOU net sales revenue growth below management’s low double-digit medium term target (weaker consumer),” concluded Morgan Stanley analyst Melinda Baxter.
She also pointed to a net sales revenue decline in US luxury brands excluding DAOU and a step-up in marketing investment, partially offsetting the expected benefits of the DAOU synergies the takeover was predicated upon.
Morgan Stanley dropped its share price target from $12 to $10.75.
Macquarie said the market update was evidence of ongoing challenges in the sector, with growth in Penfolds key to offsetting pressure in the premium and commercial wine brands.
But it wanted to hear more when Mr Ford leaves in late October and is replaced by new CEO Sam Fischer.
“We await further clarity on strategy from the incoming CEO,” the broker said.
Originally published as Treasury Wine facing struggles ahead, warn analysts
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