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Diageo PLC DGE

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Morningstar’s Analysis

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Diageo’s In-Line Fiscal 2020 Results Confirm Situation Is No Worse Than Feared

Analyst Note

| Philip Gorham, CFA, FRM |

Diageo reported fiscal 2020 preliminary results that were bang in line with our estimates. Both full-year organic sales, down 8.7%, and adjusted earnings per share, down 16% to 109.4p, were exactly in line with our forecasts, but like the brewers that have already reported results to the end of June, volumes were a whisker better and margins a touch worse than our expectations. We suspect that the distillers will suffer more than most other consumer staples manufacturers from the social distancing measures that continue to disrupt the on-trade, though we take comfort that this in-line report indicates the situation is no worse than we had modeled. We retain our conviction in our wide economic moat rating and GBX 2,600 fair value estimate. Diageo's bull run is over for the time being, and we regard the stock as being fairly valued.

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Company Profile

Business Description

The product of a merger between Grand Metropolitan and Guinness in 1997, Diageo is the world's leading producer of branded premium spirits. It also produces and markets beer and wine. Brands include Johnnie Walker blended scotch, Smirnoff vodka, Crown Royal Canadian whiskey, Captain Morgan rum, Tanqueray gin, Baileys Irish Cream, and Guinness stout. Diageo also owns 34% of premium champagne and cognac maker Moet Hennessy, a subsidiary of French luxury-goods maker LVMH Moet Hennessy-Louis Vuitton, and a near-55% stake in India's United Spirits.

Lakeside Drive, Park Royal
London, NW10 7HQ, United Kingdom
T +44 2089786000
Sector Consumer Defensive
Industry Beverages - Wineries & Distilleries
Most Recent Earnings Jun 30, 2008
Fiscal Year End Jun 30, 2021
Stock Type
Employees 27,788