29 August 2024
If you are covering Pernod Ricard’s latest results, please see the following comment from Chris Beckett, head of equity research at Quilter Cheviot:
"Pernod Ricard released its results this morning, and while they weren’t great, they weren’t worse than expected either. Given the context, there may be a relief bounce in the share price. With its June year-end, Pernod Ricard’s results follow those of competitors who have already posted lacklustre results due to worsening macro conditions.
"The challenges in key markets like China and the US have already been well-documented, so the weakness there comes as no surprise. Despite offering soft guidance for the first quarter, which covers July through September, Pernod Ricard has maintained its medium-term outlook. It is aware that current trading is weak, and the key question now is whether investors believe in the company’s ability to recover. Pernod Ricard is aiming for an organic recovery, with the goal of returning to positive growth, although their medium-term target of 4 to 7% remains distant.
"Currently, Pernod Ricard is trading at 15 times its estimated 2025 calendar year earnings, a slight discount compared to Diageo’s 18.5 times. However, Diageo is less exposed to China, as it doesn’t directly own a Cognac brand, which gives it some advantage in the current environment. That said, in the medium to long term, the spirits sector within consumer staples is likely to command a premium, especially given the sustained popularity of cocktails. Additionally, there are specific factors, such as post-COVID normalisation, that need to be considered.
"Overall, Pernod Ricard’s results are not stellar, but they align with expectations, leaving some room for optimism as they navigate these challenges."
