Shares in Diageo plc (LON:DGE) fizzed higher on Thursday after the alcoholics drinks giant beat market forecasts with its latest set of interims.
Strong spirits sales in the US and an improved performance across its scotch portfolio – which includes Bell’s, Johnnie Walker and Lagavulin – were among the primary reasons for the solid half.
Organic sales growth of 4.4% for the six months to 31 December 2016 came in ahead of the market consensus of 3.1% (Bloomberg) and even beat the highest expectation of 3.7%.
Similarly, organic profit growth also came in at 4.4% which was ahead of analysts’ forecasts of around 2.4%.
Overall, net sales were up almost 15% compared to the same period in 2015 at £6.4bn, while operating profit came in at £2.1bn – 28% ahead of 2015’s numbers.
That culminated in the Diageo upping its interim by 5% to 23.7 which (yes, you guessed it) was also ahead of expectations (23.5p).
“We have delivered a strong set of results with broad based improvement in both organic volume and top line growth and this positive momentum demonstrates continued effective execution of our strategy,” said chief executive Ivan Menezes.
“We are confident of achieving our medium term objective of consistent mid-single digit top line growth and 100bps of organic operating margin improvement in the three years ending 30 June 2019.”
Shares in the Smirnoff owner were up 5% to £22.55 early on Thursday.
It’s a ‘buy’ from Shore Capital
“The interim results highlight a stronger than expected performance from Diageo,” said City broker Shore Capital.
“There remain challenges in some markets but overall it is a story of progress and improving operational momentum.
“We expect Diageo to be the go too consumer staple in the UK in 2017 and these results should help support that view, in our opinion.”