Rémy Cointreau Stock Falls After Bernstein Downgrade on Valuation Concerns

Shares of Rémy Cointreau (RCOP.PA) fell 2.2% on Tuesday after analysts at Bernstein downgraded the stock, citing valuation concerns following a significant rally. Bernstein lowered its rating to “Market-Perform” from “Outperform,” stating that the stock’s recent surge already reflects an anticipated improvement in business conditions.

Valuation Outpaces Fundamentals

Bernstein's downgrade comes after the spirits maker's stock gained 18% in October and 42% year-to-date, substantially outperforming the 2% rise for its large-cap spirits peers over the same period. The investment firm left its price target unchanged at €53, just 2% above the stock's Oct. 26 closing price.

According to Bernstein's note, the stock's valuation is now a key concern. Rémy Cointreau trades at 25.9 times expected earnings for the next 12 months, a premium of approximately 95% compared to other large-cap spirits companies. Bernstein argued this premium, which is in line with or above its long-term average, suggests that a business recovery is now fully priced into the shares.

A Challenged Recovery Outlook

While Bernstein acknowledged some early positive signs, it noted the overall recovery is taking longer than initially expected. The firm sees a near-term outlook of broadly stable to modest sales growth.

Key market observations from the report include:

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• China: Trends for cognac, a key product, appear to be stabilizing in the company's second-largest market.
• United States: The cognac market remains weak, though the rate of decline is slowing. While the Cointreau liqueur brand is outperforming, with volumes up 1.4% in the three months to August, its lower margins are weighing on the company's product mix and pricing power.

Bernstein also highlighted the company's balance sheet, noting that net debt rose to 3.22 times EBITDA at the end of fiscal 2026, up from 2.40 times a year prior. Furthermore, aged cognac inventory is almost twice its historical level relative to sales.

Strategic Plan in Focus

Investors are looking ahead to the company's three-year "RC Forward" plan, which targets an additional €100 million in current operating profit by fiscal 2029. Bernstein remains more conservative, modeling an extra €68 million. Details of the strategic plan are expected with the company's first-half fiscal 2027 results on November 25.

Bernstein listed a faster-than-expected recovery in China and full delivery of its strategic profit target as potential upside risks. Conversely, further delays in China, continued weakness in the U.S., and persistently high inventories were cited as downside risks.