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On Tuesday, Bernstein, a leading research firm, provided an outlook for the European beverages sector for the year 2025, focusing on the spirits and beer segments. The firm noted that after a challenging 2024, the valuations of European Beverages have hit a low, comparable to post-Global Financial Crisis levels.
This is particularly evident in companies like Heineken (AS:HEIN), which according to InvestingPro data, is trading near its 52-week low of $32.77, having declined over 31% in the past six months. The recovery in 2025 hinges on a shift in news flow, with cautious optimism toward the U.S. alcohol market and potential easing of Chinese tariffs on Cognac.
For the spirits industry, Bernstein anticipates a gradual recovery in the U.S. market. The firm observed that U.S. spirits shipments per capita have decreased by 6% since their peak, despite gains in market share. This sets the stage for favorable year-over-year comparisons. The end of destocking for most companies is in sight, although caution prevails among major Wine & Spirits distributors.
Additionally, Bernstein expects an agreement between the EU and China regarding Chinese electric vehicles, which could result in the removal of tariffs on Cognac. However, the sector remains sensitive to the Trump administration's tariff policies, potential changes to U.S. alcohol guidelines, and the health of the Chinese premium consumer market.
Bernstein's top pick in the Large Cap Spirits category is Pernod Ricard (EPA:PERP), favored due to its valuation relative to Diageo (LON:DGE), which has stronger short-term momentum in the U.S. and less exposure to China. In the Mid Cap Spirits category, Campari (LON:0ROY) is the firm's top choice. Both Pernod Ricard and Campari trade at approximately 16.5 times their expected calendar year 2025 earnings, slightly below Diageo and significantly below their historical levels. On the other hand, Remy Cointreau (EPA:RCOP) may face challenges in regaining investor confidence.
Regarding the beer industry, Bernstein expects a solid yet modest top-line outlook. U.S. trends should improve slightly compared to 2024, with Europe's stability contingent on weather conditions. The emerging markets present a varied picture, with weakness in Mexico and fragility in Brazil, but potential growth in Vietnam. For Heineken specifically, InvestingPro data shows revenue of $32.85 billion with a healthy EBITDA of $6.29 billion. The company has maintained dividend payments for 33 consecutive years, demonstrating financial resilience despite market challenges.
The margin outlook appears stable, with lower grain prices potentially offset by aluminum hedge headwinds and negative foreign exchange impacts in Mexico and Brazil. Bernstein's top picks in the beer segment are Carlsberg (CSE:CARLb) and Heineken, with Anheuser-Busch InBev (EBR:ABI) also rated Outperform but with less upside due to its relative valuation.
Analysts maintain a bullish stance on Heineken, with consensus data available through InvestingPro's comprehensive research reports, which provide detailed analysis of 1,400+ top stocks.
In other recent news, Heineken NV (OTC:HEINY) has been the subject of various analyst updates. BofA Securities reduced its price target for the company from EUR 99.00 to EUR 85.00, while maintaining a Buy rating. The analysts highlighted potential for a 4-8% increase in organic earnings before interest and taxes (EBIT) for 2025 and the possibility of shareholder returns from 2026 onwards.
On the other hand, Deutsche Bank (ETR:DBKGn) downgraded Heineken's stock from Buy to Hold, reducing its price target to €76.00. The bank cited concerns over the company's financial performance from 2019 through 2024, influencing its outlook on the company's profit growth prospects.
CFRA upgraded Heineken's stock rating from Hold to Buy, indicating confidence in the company's strong branding and its potential for long-term growth despite recent challenges. The firm maintained a price target of €86.00 and highlighted Heineken's strong balance sheet which could support further innovation and potential acquisitions.
Lastly, Citi maintained a Buy rating on Heineken, with a price target of EUR99.00. The firm anticipates an improvement in both sales volumes and profit margins for the fiscal year 2025, as market challenges lessen and the company adopts a clearer strategy.
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