Pernod Reports High-Quality Earnings Growth in Fiscal 2022, but Short-Term Risks Are Increasing

Pernod Ricard posted strong fiscal 2022 results that were slightly ahead of our estimates, and confirmed that the company is comfortably passing through enough price increases to offset cost inflation. We reiterate our EUR 167 fair value estimate. Full-year sales grew by 17% organically, slightly above both our estimates and Pitchbook consensus forecasts, and well above what we consider to be a normalised long-term growth rate in the mid-single digits. These results demonstrate Pernod's pricing power, a key source of our wide economic moat rating. However, we are concerned that operating profit growth could slow next year and with the shares trading at 21 times fiscal 2023 earnings, we think more attractive risk/reward profiles can be found elsewhere in the consumer staples sector with more out-of-favour stocks such as Unilever and AB InBev.