Last Update 27 Dec 25

Fair value Decreased 2.45%

RI: Premiumization And Cost Controls Will Support Future Margin Expansion Despite Near-Term Softness

Analysts have modestly reduced their price target on Pernod Ricard to EUR 114 from EUR 118, reflecting slightly softer revenue growth and margin expectations, even as the stock is still viewed favorably.

Analyst Commentary

Analysts highlight a mixed outlook for Pernod Ricard, with the reduced price target reflecting more tempered expectations, while the Buy stance underscores confidence in the company’s longer term fundamentals.

Bullish Takeaways

Bullish analysts maintain a positive view on the company’s brand portfolio and pricing power, which they see as supportive of premium positioning and long term revenue growth.
The reaffirmed Buy stance suggests conviction that current valuation already discounts near term softness, leaving room for upside as execution improves.
Solid balance sheet and ongoing cash generation are viewed as providing flexibility for shareholder returns and selective investment in high growth markets.
Analysts continue to see structural growth in key spirits categories as a tailwind that can sustain mid term earnings expansion despite cyclical headwinds.

Bearish Takeaways

Bearish analysts are concerned that softer revenue momentum could limit near term operating leverage, pressuring margins versus prior expectations.
The reduced price target reflects increased caution around the pace of recovery in certain geographies, which may delay a re rating of the shares.
Competitive intensity and consumer down trading in some channels raise questions about the durability of recent pricing gains.
Execution risks around cost discipline and brand investment levels are seen as potential constraints on achieving prior medium term growth targets.

What's in the News

Citi reduced its price target on Pernod Ricard shares to EUR 114 from EUR 118, while reiterating a Buy rating and framing the stock as still attractive despite near term softness (periodicals).
Pernod Ricard and Trinchero Family Wine and Spirits signed a definitive agreement to transfer U.S. sparkling wine activities for Mumm Sparkling California, Mumm Napa and DVX. Trinchero is set to take over production, marketing and distribution in North America and select Caribbean markets, with the deal expected to close in Spring 2026 (key developments).
The transaction with Trinchero excludes assets linked to the G.H. Mumm Champagne brand and international Mumm sparkling wines. This allows Pernod Ricard to sharpen its focus on premium international spirits and champagne in line with its premiumisation strategy (key developments).
At the October 27, 2025 AGM, Pernod Ricard shareholders approved amendments to Articles 21 and 33 of the company’s bylaws, signaling governance and rulebook adjustments (key developments).
Pernod Ricard reaffirmed its fiscal 2026 guidance for improving organic net sales, weighted toward the second half, and projected medium term organic net sales growth of 3% to 6% per year from 2027 to 2029, alongside annual organic operating margin expansion (key developments).

Valuation Changes

Fair Value: trimmed slightly to approximately €98.43 from about €100.89, implying a modest reduction in intrinsic value estimates.
Discount Rate: effectively unchanged at around 6.18 percent, indicating a stable view of the company’s risk profile.
Revenue Growth: projected decline has deepened modestly, moving from about minus 1.74 percent to roughly minus 2.07 percent.
Net Profit Margin: eased slightly to around 15.91 percent from approximately 16.51 percent, reflecting somewhat softer profitability assumptions.
Future P/E: nudged higher to about 18.06x from roughly 17.66x, suggesting a small increase in the valuation multiple applied to future earnings.

Growth in emerging markets and ongoing premiumization are expected to drive long-term revenue and margin expansion through higher-value brand offerings.
Portfolio restructuring, cost-saving initiatives, and digital transformation efforts are set to enhance profitability and withstand short-term market challenges.
Declining demand, regulatory pressures, currency volatility, and shifting consumer trends threaten sustained growth, margin stability, and resilience in Pernod Ricard's major markets.

Catalysts

About Pernod Ricard

Produces and sells wines and spirits worldwide.What are the underlying business or industry changes driving this perspective?

The company is poised to benefit from rising spirits consumption across emerging markets, particularly India, Southeast Asia, and Africa, driven by demographic and income growth; this is expected to accelerate long-term top-line revenue as these regions continue to urbanize and expand their middle class.
Sustained momentum in premiumization and innovation-evidenced by successful launches in ready-to-drink, non-alcoholic, and premium spirits segments-positions Pernod Ricard to capture higher average selling prices and grow net margins, supported by ongoing consumer appetite for higher-value, experiential brands.
Strategic restructuring of the portfolio, including divestment of low-margin assets (e.g., Imperial Blue and the Wines business), alongside intensified focus on higher-margin premium brands, is expected to be immediately accretive to margins and profitability, even as it temporarily weighs on revenue.
A new phase of operational efficiency, with a targeted €1 billion in further cost savings by 2029, and an already completed €900 million program, is expected to support ongoing organic margin expansion and improved free cash flow conversion (targeting ~80%), enhancing earnings resilience despite short-term headwinds.
Growing investment in digital transformation, e-commerce channels, and agile, simplified organization structures enables Pernod Ricard to better reach evolving consumer segments, maximize marketing ROI, and strengthen future revenue growth as beverage alcohol sales shift increasingly online.

Pernod Ricard Earnings and Revenue Growth

Pernod Ricard Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Pernod Ricard's revenue will decrease by 0.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 14.8% today to 17.0% in 3 years time.
Analysts expect earnings to reach €1.8 billion (and earnings per share of €7.55) by about September 2028, up from €1.6 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €2.3 billion in earnings, and the most bearish expecting €1.6 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.9x on those 2028 earnings, up from 15.4x today. This future PE is lower than the current PE for the GB Beverage industry at 19.2x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 5.98%, as per the Simply Wall St company report.

Pernod Ricard Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Sustained declines and ongoing weakness in key mature markets such as the U.S. and China-due to muted consumer confidence, economic headwinds, regulatory interventions (e.g., tariffs, official consumption bans), and inventory adjustments-raise concerns about Pernod Ricard's ability to drive long-term revenue and profit growth as these historically high-margin markets remain soft.
Escalating regulatory pressures, including substantial tax increases (e.g., 50% excise increase in Maharashtra, India) and ongoing official bans on alcohol consumption for public officials in China, threaten both sales volumes and net margins by compressing demand and complicating local execution in several large markets.
Currency volatility and adverse FX movements (notably U.S. dollar/euro) have led to significant reported declines in sales, profit from recurring operations, and EBIT, creating ongoing risks to group earnings and margin expansion in the medium and long term.
A more challenging pricing environment, with management explicitly noting difficulty in taking price in key markets (outside of hyperinflation regions), alongside negative mix effects, may cap Pernod Ricard's ability to deliver organic top-line growth and stable or expanding net margins.
The global trend toward moderation, coupled with heightened health awareness, potential trade-downs during periods of lower consumer purchasing power, and the rise of low/zero-alcohol alternatives, risks structurally slower volume growth and increased reliance on premiumization-which could expose the company to demand volatility and margin compression during downcycles.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €110.368 for Pernod Ricard based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €156.0, and the most bearish reporting a price target of just €87.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €10.8 billion, earnings will come to €1.8 billion, and it would be trading on a PE ratio of 17.9x, assuming you use a discount rate of 6.0%.
Given the current share price of €99.26, the analyst price target of €110.37 is 10.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

RI: Premium Positioning And Global Brands Will Drive Resilient Long-Term Expansion