Diageo share price outperforms as group gets ‘its house in order’

Diageo’s (LON:DGE) share price has recovered from a morning dip after Investec published an upbeat comment, noting that the group was ‘getting its house in order’, which should translate into operational wins. The broker reiterated its ‘buy’ recommendation on the stock and increased the target price from 2,100p to £2,230p, indicating a potential increase of 21.16 percent from Diageo’s current share price.

The world’s largest spirits maker reports interims on Thursday and analysts expect overall revenue of £5.70 billion for the first half of its financial year, down from £5.90 billion a year earlier. Pre-tax profit is estimated to fall to £1.69 billion, from £1.71 billion, according to consensus forecasts compiled by Thomson Reuters.
Investec analyst Alex Smith said in a note today that while he expected few surprises in the results, “the changes taking place behind the scenes” at Diageo would soon translate into better operational results. “We back management to build on improving execution in the US, while emerging markets should offer greater visibility on conclusion of the painful destocking process. Longer term, as global leader of the ‘premiumising’ and aspirational driven international spirits industry, Diageo is well positioned to benefit from nascent emerging market penetration rates,” Smith added.
As of 12:55 GMT, Diageo’s share price was 0.27 percent better off at 1,846.50p, gaining ground following a muted start to the trading session. The blue-chip distiller was outperforming the FTSE 100 index, which had meanwhile shed 0.38 percent to stand at 5,854.93 points.
As of 13:32 GMT, Tuesday, 26 January, Diageo plc share price is 1,843.25p.