On Friday, BMO Capital adjusted its outlook on The Duckhorn Portfolio, Inc. (NYSE: NAPA) shares, decreasing the price target to $9 from the previous $10 while maintaining a Market Perform rating on the stock.
The revision follows the company's fiscal third-quarter 2024 pre-announcement, which reported adjusted EBITDA of $38 million—slightly above the lowered consensus—and revenue of $93 million, at the higher end of the forecasted range.
The Duckhorn Portfolio's updated 2024 guidance now includes contributions from Sonoma-Cutrer and reflects a doubled synergy expectation, anticipated to reach up to $10 million, primarily in fiscal year 2025.
This update comes amidst a backdrop of persistent industry challenges that have influenced the company's performance and outlook.
The analyst from BMO Capital has recalibrated the expectations for Duckhorn's core business in light of the recent financial results and industry conditions.
The inclusion of Sonoma-Cutrer's contributions in the updated guidance is a notable factor in the firm's ongoing assessment of Duckhorn's financial prospects.
Despite the lowered price target, BMO Capital expressed a positive view on Duckhorn's long-term potential. The firm cited ongoing industry pressures and the current lack of short-term visibility as reasons for its cautious stance in the near term.
Duckhorn's ability to navigate these industry softnesses while integrating the expected synergies from Sonoma-Cutrer will be critical to its future performance.
In other recent news, Duckhorn Portfolio posted its third quarter financial results, demonstrating resilience amid market challenges. The company's net sales reached $92.5 million, with an adjusted EBITDA of $37.7 million, reflecting a 40.8% margin.
This growth was driven by the integration of Sonoma-Cutrer and a reorganization of their wholesale distribution network. Despite a decline in wholesale to distributor net sales by 11%, direct-to-consumer sales saw a significant increase of 71.4%.
In light of these developments, Duckhorn revised its full-year guidance to net sales between $398 million and $408 million and an adjusted EBITDA of $146 million to $150 million.
The company anticipates some unevenness in shipments and depletions in the next two quarters due to distributor transitions but expects improvement in wholesale channel trends.
These recent developments indicate Duckhorn's commitment to sustained growth and adaptability in a competitive industry. The company's strategic initiatives and focus on execution are expected to navigate current market dynamics effectively, as reflected in the confidence expressed by Duckhorn's management.
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