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Remy Cointreau

RCO: XPAR (FRA)
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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
€487.00HlzgdzVmzccftj

Remy’s Q1 Sales Better Than Feared; Risk Still Abounds and Are Not Reflected in Elevated Share Price

Management at narrow-moat Remy Cointreau had set the bar quite low heading into its fiscal first-quarter sales update, leaving investors with optimistic expectations. While the firm easily beat its guidance (which called for a decline of roughly 45%), the countervailing product and channel dynamics seemed like a net negative from our vantage point, particularly as it relates to profitability. We plan to raise our fair value estimate to EUR 110 from EUR 109 due to the time value of money. Nevertheless, we believe the market is now extrapolating a level of growth and margin profile that stretches credulity given the uncertainty the firm faces and view the shares as overvalued. In our opinion, opportunities in the distillation industry are sparse, but there are still pockets of value in brewing, for example in wide-moat, Best Idea Constellation Brands and no-moat Molson Coors.

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