UBS has adopted a more optimistic outlook on brewing companies, while simultaneously lowering its expectations for wine and spirits manufacturers, according to a new analysis.
The bank has upgraded Carlsberg to a "buy" rating (from neutral), setting a target price of 1,060 Danish kroner (previously 810). UBS expects Carlsberg to return to stable volume growth, bolstered by the Britvic deal and increased investments in China. The world's largest brewer, AB InBev, along with Heineken, are also anticipated to see a recovery in volumes starting next year. For Anheuser-Busch InBev and Heineken, UBS reiterates its buy recommendations, with target prices of 68 and 84 euros, respectively.
On the spirits front, Diageo is downgraded to neutral (from buy), with a new target price of £18.5 (down from £22.5), following weaker performance in the United States. Meanwhile, Rémy Cointreau is cut to sell (from neutral) amid ongoing economic weakness in both the U.S. and China, with a target price of EUR33 (previously EUR53).
Pernod Ricard and Campari retain their neutral recommendations, with target prices of EUR75 and EUR6.2, respectively. According to UBS, brewers stand to benefit first as cyclical headwinds subside, while spirits companies continue to be weighed down by structural challenges, the analysis notes.
