Diageo’s trading statement was a case of no news is good news, according to Bank of America.
The bank felt the update should provide some reassurance and evidence of growth acceleration in the second half should support a re-rating.
BofA said while there is no explicit commentary on current trading it believes that trading in the US has not changed much in the last two months and is still growing around mid-single digits, with Diageo below that
In Europe, it thinks the first half should benefit from pricing actions taken in the second half of the previous financial year while in China, it should be less impacted by the current environment, while momentum in India should have remained strong.
The broker has buy rating on Diageo but cut its price target to 3,600p from 3,800p.
But positive forex movements drive an increase to EPS estimates of between 3-5%.
“For FY24, we now assume a £230m negative FX impact on EBIT versus c-£400m previously, noting, however, that Diageo will soon move to USD reporting,” the bank said.
It also trimmed its organic forecasts for 2024 marginally, it now expects +4.9%/+6.0% organic sales/EBIT for 2024 (versus +5.2%/+6.5% previously).