Diageo PLC has divided analysts after removing medium-term guidance and flagging the potential impact of US tariffs against Canada and Mexico on Tuesday.
Deutsche Bank hit the drinks maker with a ‘sell’ rating following interim results, noting sales and profit had declined slower than expected over the first half to December.
However, guidance implied a sub-1% increase in organic sales and 1% drop in operating profit, Deutsche flagged, against consensus for growth of 2.8% and 3.8% respectively.
Both UBS and Jefferies analysts stuck with ‘buy’ ratings for Diageo in the meantime.
“Sentiment on Diageo is at the point of peak pessimism,” Jefferies said.
“Investor perceptions on alcohol have rarely been more bearish [and] estimates have troughed and guidance has been pulled.”
Jefferies suggested Diageo was in “visible recovery mode,” though, with any improvement leaving scope for shares to “re-rate to north of 20x price-to-earnings”.
UBS added: “We see parallels to 2015-16, when a topline inflection with a stepped up margin [and] cash conversion focus led to upgrades and a re-rating.”
Shares fell 2.1% to 2,278p on Wednesday.