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Diageo PLC ADR DEO

Morningstar Rating
$151.06 +0.78 (0.52%)
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Company Report

Diageo Earnings: Near-Term Visibility Is Limited, but a Trough in the Cycle May Be Approaching

Diageo reported a first half of fiscal 2024 performance that was better than our recently-lowered forecasts. It is a relief that performance was no worse than we had feared following the company's profit warning in November, but broad-based volume weakness suggests that discretionary consumer spending remains soft. We are reiterating our wide moat rating and raise our fair value estimate to GBX 3,100 from GBX 3,000 to account for the better-than-expected results. We believe Diageo is moderately undervalued, based on our assumption of gradually recovering revenue growth, but near-term visibility is limited, and if consumer spending deteriorated further, there could be further downside to the current market price.

Price vs Fair Value

DEO is trading at a 4% discount.
Price
$151.06
Fair Value
$336.00
Uncertainty
Low
1-Star Price
$958.59
5-Star Price
$154.20
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Across the U.S., Diageo's distributors have more than 2,800 dedicated salespeople focused solely on the company's products. This sizable support base has contributed to above-average operating margins in this highly profitable region.

Bears

The spirits industry is more cyclical than beer, particularly in the premium segment and above, and Diageo's price positioning at the high end can hurt revenue when the global economy slows.

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News

Trading Information

Previous Close Price
$150.28
Day Range
$150.27151.33
52-Week Range
$135.63190.02
Bid/Ask
$145.35 / $155.00
Market Cap
$84.36 Bil
Volume/Avg
787,436 / 783,640

Key Statistics

Price/Earnings (Normalized)
15.95
Price/Sales
3.53
Dividend Yield (Trailing)
2.60%
Dividend Yield (Forward)
2.60%
Total Yield
4.52%

Company Profile

The product of a merger between Grand Metropolitan and Guinness in 1997, Diageo is one of the world's leading producers of branded premium spirits, approximately level with Kweichow Moutai in revenue terms. It also produces and markets beer and wine. Brands include Johnnie Walker blended scotch, Smirnoff vodka, Crown Royal Canadian whiskey, Captain Morgan rum, Casamigos tequila, 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-56% stake in India's United Spirits.
Sector
Consumer Defensive
Industry
Beverages - Wineries & Distilleries
Stock Style Box
Large Core
Total Number of Employees
30,269

Competitors

Valuation

Metric
DEO
RCO
BF.B
Price/Earnings (Normalized)
15.9524.9630.76
Price/Book Value
6.512.797.96
Price/Sales
3.533.746.45
Price/Cash Flow
14.7927.4528.97
Price/Earnings
DEO
RCO
BF.B

Financial Strength

Metric
DEO
RCO
BF.B
Quick Ratio
0.570.571.02
Current Ratio
1.632.503.29
Interest Coverage
6.7514.119.80
Quick Ratio
DEO
RCO
BF.B

Profitability

Metric
DEO
RCO
BF.B
Return on Assets (Normalized)
10.02%5.55%10.31%
Return on Equity (Normalized)
46.73%10.40%24.65%
Return on Invested Capital (Normalized)
15.82%8.19%14.30%
Return on Assets
DEO
RCO
BF.B
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