Diageo PLC (LSE:DGE), maker of alcoholic drinks such as Smirnoff, Guinness and Captain Morgan, has left brokers differing in opinion on its response to inflationary pressures ahead of interim results tomorrow.
In a recent note, Barclays slashed forecasts and share price targets, while US bank Jeffries lately reiterated a 'buy' rating for the FTSE 100-listed group.
Indicators of downtrading in the US, inflation impacting demand across Europe and Africa and volatility in China were all reasons given by Barclays as behind its cuts.
Yet, recent growth in the 'super-premium' drinks market - most recently the US$437.5mln acquisition of dark rum drink Don Papa - strengthened Jefferies' position.
“Don Papa is consistent with the strategy to scale up fast-growth premium brands with good liquids, attractive packaging, and authentic backstories,” said Jefferies, setting a £43 share price target and expecting to see close to 7.9% revenue growth.
The share price of Diageo has remained relatively stable over the last six months, and it was one of the rare gainers in 2022, currently trading shares at £36.75, up 1.7% since the start of 2023.
In comparison to smaller rivals such as Distil (AIM:DIS), which is down 55% in the same period, the Tanqueray owner’s ability to remain a “best-in-class long-term value generator”, according to Jefferies, could mean it avoids suffering a similar fate.