Shares of French cognac maker Remy Cointreau (EPA:RCOP) rose nearly 4% on Monday after UBS moved the stock from "sell" to "neutral" and increased its 12-month price target to €44 from €35. The brokerage said the upgrade reflects greater confidence in the company's newly unveiled RC Forward strategy despite persistent headwinds in the global spirits market.
The RC Forward plan, announced alongside Remy’s full-year results, targets an additional €100 million of earnings before interest and tax (EBIT) over three years - a figure UBS equates to roughly 60% growth compared with the fiscal 2026 reported EBIT of €165 million. UBS analysts assigned about a 60% probability to the successful execution of the programme, while noting that management must still demonstrate a consistent track record of delivery.
Financial results for the year ended March 2026 show net revenue declined 5% to €935 million. Reported EBIT was €165 million, slightly ahead of analyst expectations of €162 million. Adjusted net profit came in at €89.2 million, about 6% above consensus estimates.
Within the group, the cognac division produced an EBIT of €141.5 million, beating forecasts, whereas the Liqueurs & Spirits segment missed expectations. On an organic basis, EBIT contracted 11.5%, though UBS highlighted that the drop was less severe than analysts had predicted.
Margins were pressured: gross margin contracted by 370 basis points on an organic basis, an effect UBS attributed to tariffs, adverse price and mix dynamics, and higher input costs. Free cash flow improved to €53.8 million, raising cash conversion to 27% from 10% a year earlier. At period end net debt stood at €690 million, with leverage of 3.22 times. Remy also reduced its dividend by half to €0.75 per share, with one-third of the dividend payable in stock.
Under the RC Forward blueprint, Remy intends to broaden its U.S. footprint via a lower-priced cognac offering, accelerate expansion in the higher-margin XO segment, increase exposure to prestige brands, and double sales contributions from both emerging markets and global travel retail.
UBS laid out near-term expectations under the plan, forecasting organic revenue growth of 3.7% and organic EBIT growth of 4.5% for fiscal 2027. The brokerage projects net sales will reach €975 million and EBIT will rise to €169 million in that fiscal year.
Even with signs of stabilisation and the potential upside from RC Forward, UBS noted that Remy trades at a substantial premium to larger competitors Diageo and Pernod Ricard, at 21.8 times estimated calendar 2027 earnings.
Key points
- UBS upgraded Remy Cointreau to "neutral" from "sell" and raised its 12-month price target to €44 from €35, reflecting increased confidence in the RC Forward plan.
- Fiscal 2026 results showed revenue of €935 million (-5%), EBIT of €165 million (beat), adjusted net profit of €89.2 million (6% above consensus), and improved free cash flow of €53.8 million.
- The RC Forward strategy focuses on U.S. expansion at lower price points, growth in XO, increased prestige exposure, and doubling sales from emerging markets and travel retail; UBS forecasts modest organic growth for fiscal 2027.
Risks and uncertainties
- Execution risk - UBS assigns roughly a 60% probability to successful delivery of the RC Forward plan, indicating material execution risk remains for the company and its investors.
- Market and margin pressures - gross margin contracted by 370 basis points organically due to tariffs, price and mix effects, and higher input costs, presenting ongoing margin risk for the beverages sector.
- Balance sheet and payout adjustments - net debt of €690 million and leverage of 3.22 times, together with a halved dividend, underscore financial constraints that could affect returns to shareholders and strategic flexibility.
Remy’s results and the strategic pivot will be watched closely by investors and market participants across the beverages and consumer discretionary sectors, where demand patterns, pricing power, and input cost pressures remain central to near-term performance.
Overall, UBS’s rating change and target increase reflect a more constructive stance on Remy’s prospects should RC Forward be executed as planned, but the firm’s valuation premium over larger peers and the uncertainties noted above temper the outlook.