Pernod Ricard: Rocky Start to the Fiscal Year, but Medium-Term Targets Remain Intact

Wide-moat Pernod Ricard reported its first-quarter trading update for fiscal 2025, which was below our expectations. While the numbers were light, management reiterated their medium-term outlook of 4%-7% organic net sales growth and organic operating margin expansion of roughly 55 basis points. We view the slowdown as cyclical rather than structural and expect a return to top-line growth within the next fiscal year. Our long-term forecasts remain unchanged and we maintain our EUR 185 fair value estimate. While current shares are trading below our intrinsic fair value estimate, we believe the cyclicality of the category means the stocks are unlikely to provide the defensive qualities investors seek in consumer staple equities.