Changes are taking place behind the scenes at Diageo, according to Investec, and the broker will be looking for signs these changes are working.
Two years of disappointing operational performance have left the Johnnie Walker whisky maker unloved, but the broker believes the transformation from a “sell-in to a sell-out focused organisation” will result in better inventory management, and will provide an indication that management is getting to grips with its problems.
The broker thinks the company is close to solving its key US spirits business, and emerging markets should continue to present a major growth opportunity, albeit with the occasional period of heavy going.
For the half-year, Investec predicts organic sales growth of 1.7%, despite a projected 2% year-on-year decline in sales in North America. Emerging markets are tipped to show 5.2% sales growth.
The strength of the pound may continue to be a worry, but Shore Capital reckons the weakening of sterling over several months and the prospect of a UK interest rate rise will have eased this impact.
Phil Carroll, analyst, said: "This set of results could be particularly interesting, in our view, as it could mark the end of the downgrade cycle for Diageo due to the benefit of an improving operational performance with potentially accelerating trading momentum and easing FX headwinds following the notable weakness in sterling of late."
He added that he thinks Diageo will say the performance in emerging markets will be still negative, but improved.
"This could be the nadir of the down-cycle for Diageo," he added.
At Euromoney, chief executive officer Andrew Rashbass kicked off a strategic review of the company when he took over in November of last year, and the company has scheduled an investor day for 9 March, so Thursday's trading statement may not contain much that is new, for fear of spoiling any big surprises on 9 March.
“Given the ongoing strategic review we hope/expect this trading update to confirm confidence with full year estimates, though find it hard to see there has been any improvement in trading backdrop,” Numis Securities opined.
“It is worth noting that recent moves in dollar and euro vs sterling should provide a little buffer to estimates,” it added.
Sausage skins maker Cranswick should have had a good Christmas, suggested Peel Hunt, which partly bases its view on a stronger performance over the Yule-time period at Tesco and a steady showing at J. Sainsbury.
“The company reported 10% LFL [like-for-like] sales growth in H1 [first half], and this included 13% volume growth and 3% deflation. This was an exceptional period because of easy comps, so we would expect growth to be more like 5% in Q3 [third quarter]. Last year volumes were +2% in Q3,” Peel Hunt noted.
Significant announcements expected
Interims: CPL Resources (LON:CPS), Diageo (LON:DGE), Renishaw (LON:RSW)
Finals: Aukett Swanke Group (LON:AUK)
Trading statements: 3I Group (LON:III), Anglo American (LON:AAL), Daily Mail & General Trust (LON:DMGT), Euromoney Institutional Investor (LON:EM), FirstGroup (LON:FGP), Kaz Minerals (LON:KAZ), Lonmin (LON:LMI), RPC Group (LON:RPC), SSE (LON:SSE)
Economic: UK – Preliminary gross domestic product. US – Durable Goods Orders, Pending Home Sales, Unemployment Claims