Diageo PLC (LSE:DGE) will likely see growth “normalise” in 2023 according to Jefferies analysts, who reiterated a ‘buy’ rating for the alcoholic drinks company, noting that the shares were “inexpensive for the quality”.
Having seen two years of strong recovery post-Covid, the Jefferies analysts predicted that the Johnnie Walker, Smirnoff and Tanqueray owner will see organic sales growth of between 5% to 7% in the medium term, with earnings before tax rising by 6% to 9% in the same period.
FTSE 100-listed Diageo is due to report half-year results on 26 January 2023 and the analysts said their top-line predictions were similar to Wall Street estimates of 7.9% growth.
The Jefferies analysts did suggest they are cautious of high energy and glass costs in Europe, alongside “conservatism” towards operating leverage in the Asia-Pacific region.
They also suggested there were early signs of shifting consumer habits in the US, with consumers potentially buying fewer “premium” branded beverages.
Despite this, spirits remain an “affordable luxury” for more affluent consumers, the analysts added.
Last week, analysts at Barclays cut their forecasts for Diageo, given volatility in China alongside changing drinking habits in the US, which it admitted were yet to take place on any large scale.
While the impact of inflation will likely be a key focus when Diageo reports in January, Barclays expects the brand’s growth to remain “resilient”.