The New Year has brought no cheer for Diageo with Deutsche Bank following up its ‘sell’ note of November with another brutal update reiterating the message.
Deutsche Bank was a seller even before the Guinness, Johnnie Walker and Smirnoff group’s profit warning that month and its latest update suggests things have become worse since then.
“Industry data and peer read across suggest that Spirits demand has continued to deteriorate following Diageo’s 10 November 2023 profit warning,” said the bank.
As a consequence, it has reduced its estimates for both first-half and full-year 2024 even though it is already the lowest of those submitted to the consensus aggregator.
The broker's price target comes down to 2,450p from 2,805p.
“With scope for demand to deteriorate further, we see the material second half 2024 acceleration implied by consensus estimates as unlikely.
“Given recent performance Diageo replaces Pernod as our least preferred name in European Beverages,” it added.
'Sell' is the rating with the first-half results on 30 January likely to be a catalyst for more share price weakness, it believes.
Here, Deutsche Bank expects Diageo to report a first-half decline of -2.3%/-5.5% in organic sales/operating profit growth compared to its previous estimate of -1.6%/-4.5% and consensus forecasts of 0.0%/-4.7%.
Shares fell 0.8% to 2,782p.