On Tuesday, Citi adjusted its outlook for Remy Cointreau SA (RCO:FP) (OTC: REMYY) shares, reducing the price target from EUR 120.00 to EUR 115.00, while continuing to endorse a Buy rating.
The financial firm anticipates a persistent weakness in the company's second-quarter organic sales growth (OSG), projecting a -15.1% figure, which is closely aligned with the first quarter's -15.6% result.
The analysis by Citi indicates that the Cognac division is likely to experience a sharper decline in the second quarter, with OSG estimated to fall to -17.8%. This is attributed to more challenging comparisons in the U.S. market and subdued depletion rates.
Furthermore, the period leading up to the Mid-Autumn Festival in China is expected to have been disappointing, which could contribute to the division's underperformance.
Despite the anticipated weak performance in the Cognac sector, there is an expectation of a modest improvement in the Liqueurs & Spirits OSG, as the issues that affected the first-quarter results in the EMEA region are not expected to recur.
However, the ongoing uncertainties surrounding tariffs in China and the low visibility and confidence in the company's ability to deliver results make it unlikely that the second-quarter outcomes will significantly boost investor sentiment towards the stock.
Even with these challenges, Citi maintains a positive long-term outlook for Remy Cointreau, suggesting that the stock may offer the "greatest absolute upside" within their coverage universe over a two to three-year period. This optimistic stance is upheld despite the near-term headwinds faced by the company.
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