Diageo Shares Rise Ahead of AGM

Investing.com — Shares of Diageo (NYSE:DEO) (LON:DGE) rose on Thursday after the company issued a trading statement ahead of its 2024 annual general meeting.

At 6:58 am (1058 GMT), Diageo was trading 4.6% higher at £2,613.5.

“The environment for spirits remains challenging, no more no less than two months ago, and company expectations are unchanged,” said analysts from BofA Securities in a note.

BofA reiterated its ‘buy’ rating on the stock with a price objective of £2,800, stating that “the worst is behind in most markets and that international spirits is still an attractive category, with the core growth drivers (demographics, share of alcohol gains, premiumisation) all still in place.”

The statement did not include specific financial figures or refer to the previously mentioned mid-term sales growth target of 5 to 7%, a shift from past updates.

Instead, Diageo emphasized that it remains well positioned to outperform the market once consumer conditions improve.

BofA analysts suggest the company may be gradually stepping away from this target, which aligns with current market consensus of closer to 5%. They do not view this as a negative, given adjusted expectations in the market.

Regionally, the update did not offer explicit details, but analysts pointed out that key trends remain unchanged. In the U.S., the spirits market remains flat, with Diageo’s performance tracking the industry.

In Europe, beer continues to outperform spirits, which remain weak. Latin America shows early signs of stability outside of volatile Mexico, while Asia presents a mixed picture, with India strong and Australia difficult.

In China, Diageo faces tough comparisons following last year’s exceptional growth.

BofA forecasts stronger growth than consensus, projecting sales to rise 4.5% to 5%, EBIT 5.5% to 6%, and EPS +7-8% over the mid-term.

Despite trading at a 7% premium to European staples, Diageo’s valuation remains attractive compared to many U.S. counterparts, underpinned by its strong portfolio and market position.