On Thursday, Citi adjusted its outlook on Pernod Ricard (EPA:PERP) SA (RI:FP) (OTC: PDRDY), reducing the price target from €160.00 to €148.00, while maintaining a Buy rating on the stock. The revision reflects concerns over several factors impacting the company's performance, including the market situation in China, competitive challenges in the United States, and political uncertainties in France.
In a recent statement, the analyst from Citi highlighted the issues weighing on Pernod Ricard's shares. The forecast for the company's financial performance has been slightly lowered, with a roughly 2% decrease in expectations, mainly attributed to the company's struggles in the U.S. market. Consequently, the forecasts for FY25 organic sales and EBIT are now 1.4% lower than previously anticipated, falling short of the company's current guidance.
The analyst anticipates that Pernod Ricard's management will likely adjust the FY25 guidance metrics to reflect these changes when the first-half results are announced in February. With the end of the year approaching, consensus earnings estimates are expected to be revised downwards, presenting a challenging environment for the company's stock in the short term.
Despite these challenges, Citi's outlook suggests that Pernod Ricard's stock may have limited downside potential. The stock is currently trading at a significant discount compared to its peer Diageo (LON:DGE), with a 29% lower price-to-earnings ratio for the calendar year 2025. This valuation gap suggests that, despite near-term headwinds, Pernod Ricard's share price might be approaching a low point relative to its historical performance.
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