Pernod Ricard Earnings: Weak First Half but Management Reiterates Medium-Term Outlook

Pernod Ricard reported a first-half fiscal 2024 performance that was very close to our forecasts, but the company underperformed close peer and wide-moat-rated Diageo, which posted an organic sales decline of 0.6% in the same period, lowered its guidance for the rest of the year, and reduced its share repurchase program. The market reacted positively to the report, however, with the stock gapping up in early trading after the release, most likely due to management reiterating its medium-term revenue growth guidance of 4% to 7%. We will lower our near-term estimates, but this will not impact our EUR 185 fair value estimate or our wide moat rating. Both Pernod and Diageo are trading below our estimates of intrinsic value, but we believe the cyclicality of the category means the stocks are unlikely to provide the defensive qualities many investors seek in investments on consumer staples equities.