Bank of America Merrill Lynch expects Treasury Wine Estates to more than double US earnings to $289 million in 2019, helping to power the company to a profit of $489m in the year, up from $218m last year.

In a report today, BAML analyst David Errington maintained his bullish outlook for Treasury (TWE) having executed a complete backflip on the company’s US outlook.

Two years ago, Errington demanded the company sell the US business claiming it was a drag on earnings.

The business accounts for 44 per cent of the company’s net sales revenue, against 27 per cent in Australia, and 36 per cent of earnings, against 24 per cent in Australia.

This follows last year’s $660m Diageo acquisition.

Errington based his about face on his confidence the company can match its restructuring efforts in Australia based on exiting unprofitable wineries, rebuilding priority brands, rebuilding relationships with distributors and finding new markets for US wine.
“We forecast EBIT in the US to increase 110 per cent from FY16 to FY19 (from $136m in FY16 to $289m in FY19). This increase is based on the work TWE has done in restructuring and resetting its US business in terms of culling non-priority (low-profit) products and integrating the recently acquired Diageo assets,” he said.

Errington said he expected “sales from TWE’s US wine business to grow strongly increasing from $991m in FY16 to $1,392m in FY19 (using constant currency assumptions).”

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