European beverages: DB cuts Pernod and Remy after dismal summer for booze stocks

Reuters

European beverages: DB cuts Pernod and Remy after dismal summer for booze stocks

Sep 9, 2024 at 9:22 am GMT

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** Deutsche Bank says soft drinks are the clear winner in the European beverages sector, while spirits and beer have suffered from a combination of negative estimate revisions and multiple contraction post a dismal summer

** "Brewers have not performed as well as we expected due to a combination of adverse weather in June and a lack of COGS (cost of goods sold) tailwinds," says DB

** It still sees the beer sector better positioned than spirits on attractive valuations and more resilient demand, with better weather in July/August providing a tailwind to Q3

** "Spirits slowdown might be structural," DB adds, saying it does not expect U.S. spirits to return to the 4-6% growth rate achieved in 2000-2019, with 2-4% growth as the more likely outcome

** DB turns more cautious on China given macro and regulatory headwinds, and says Remy Cointreau RCOP.PA, Carlsberg CARLb.CO, Pernod Ricard PERP.PA and AB Inbev ABI.BR are at the biggest risk from this

** It names Heineken HEIN.AS its top pick, replacing Carlsberg, while keeping "buy" rating on both stocks

** It cuts Pernod Ricard to "sell" from "hold" and Remy Cointreau to "hold" from "buy" due to headwinds in China and the U.S.

RATINGS & PRICE TARGETS

COMPANY	RATING	OLD RATING	PT	OLD PT
Campari CPRI.MI	Buy	-	EUR 9.70	EUR 10.40
Carlsberg	Buy	-	DKK 1,100	DKK 1,200
Coca-Cola Europacific Partners CCEPC.L	Buy	-	EUR 90	EUR 78
Coca-Cola HBC CCH.L	Buy	-	GBp 3,150	GBp 2,950
Heineken (top pick)	Buy	-	EUR 99	EUR 100
AB Inbev	Hold	-	EUR 54	-
Remy Cointreau	Hold	Buy	EUR 70	EUR 112
Royal Unibrew	Hold	-	DKK 550	-
Diageo DGE.L (least preferred)	Sell	-	GBp 2,430	-
Pernod Ricard	Sell	Hold	EUR 106	EUR 120