NZX & ASX Add to Gains | Treasury Wine Estates

17 October 2019

​​Global markets​ were mixed overnight as President Trump suggested a trade deal with China probably won’t be signed until he meets with Chinese President Xi Jinping, and US equities were mostly weaker with mixed earnings reports, a weaker US retail sales print and the prospects of trade negotiations on the minds of investors.

​As we touched on yesterday, analysts are forecasting the worst quarterly profit performance in about three years for US companies, with industrials among those most at risk from the trade dispute, so the bar has been set relatively low.


Stock in Focus: Treasury Wine Estates (TWE:ASX)

​​​TWE shares jumped yesterday as the winemaker as management​ updated guidance ​at the AGM ​that ​they remain track for a 15-20%​ lift in operating earnings. Chief executive officer Michael Clarke told investors he was “pleased’ with performance over the first quarter but declined to provide specific details.

The news would have disappointed some high profile short sellers who have also accused it of “channel stuffing” where wine is sold to wholesale distributors and the revenue booked before the wine is actually sold onto consumers. This kind of practice is not actually unusual in the consumer goods industry and Treasury Wines has dismissed the allegations.

We continue to maintain a positive view on TWE and believe they will continue to benefit from demand as the Chinese consumer pallet evolves, as part of our dining boom investment theme and as a beneficiary of a weaker Aussie dollar.

We currently have a BUY​ (High-Risk)​ rating on ​TWE.



Australia & New Zealand Market Movers

​​The Australian market​ rallied yesterday (ASX 200 Index +​1.​​27​%) for a 5th straight session. CSL was a standout, rising to a new record high of $253 and taking its year-to-date gains to 37%, to become the second-biggest weighting on the sharemarket. CSL reaffirmed 2019-20 net profit guidance of $US2.05 billion to $US2.11 billion at its annual meeting. Mining giant Rio Tinto announced a largely in-line with prior guidance production update. 

The New Zealand market continued its rally on Wednesday (NZX 50 Index +​1​.​21​%)​ as the NZX50 posted its 4th day of gains. Fisher & Paykel Healthcare shares continued to lift the market, hitting fresh all-time highs. Restaurant Brands was among the top gainers​ as the company reported a small dip in first-half profit, due in part to new accounting standards, and said it expects to lift annual earnings by at least 10​%​.

3 Things Markets Will be Watching this Week

  1. ​​​​US earnings season ​for the 3rd quarter kicks off this week, with the major US Banks the first to report quarterly profits.
  2. Minutes from​ the last RBA meeting are released on Tuesday
  3. ​A host of Chinese economic figures are published on Monday.


Have a Great Day,


The Australian market​ rallied yesterday (ASX 200 Index +​1.​​27​%) for a 5th straight session. 

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