Diageo PLC (LSE:DGE) rose to the top of the FTSE 100 risers after UBS added its name to the (short) list of brokers predicting a recovery in the Guinness and Johnnie Walker group’s fortunes in 2025.
In fact, Diageo got a double upgrade from the Swiss bank with its rating rising to 'buy' from ‘sell’ based on the prospects for strong growth in areas such as Tequila.
UBS conceded that the US market remains tough and 2025 is likely to see volumes decline generally. However, the cycle will turn and UBS is confident that the US spirits sector will be back to growth of around 3% annually in time.
While that is below its previous rates, it is still above most consumer product categories, UBS pointed out.
For Diageo specifically, UBS expects its tequila arm (Don Julio) and whisky-based Crown Royal to help the US 'sell-out' rise to plus 3.6% in the first half of 2025, significantly outperforming an industry running at minus 1%.
“Following 31% EPS downgrades over the past two years, we think investors can gain comfort the business is towards the end of its earnings downgrade cycle,” said the bank.
As well as the buy rating, UBS has raised its price target to £29.20 (from £23).
Shares today were up 3.5% at 2,577p.