Diageo delivers with first half ‘beat’
Diageo (DGE) £29.39
Gain to date: 4.9%
Original entry point: Buy at £28.02, 2 August 2018
After a period of languishing in the red, our August 2018 ‘buy’ call on drinks maker Diageo (DGE) is refreshingly in the black.
Our patience with the Johnnie Walker whisky-to-Smirnoff vodka maker has thus been rewarded.
Forecast-beating first half results (31 Jan) and an increase in the share buyback from £2.34bn to £3bn for the year ending 30 June 2019 provided catalysts for the latest upward share price movement.
Organic net sales growth of 7.5% and organic operating profit growth of 12.3% were both ahead of consensus estimates with the beat driven by the emerging market regions of Latin America, Africa and Asia.
Diageo also grew sales by 4.7% in the US, where management is optimistic the Captain Morgan-to-Casamigos brands owner can continue to serve up growth in line with or ahead of the market.
This is a high-quality company with global scale and brand power, defensive characteristics including strong free cash flow and long term growth potential in emerging markets including China and India.
We’re sticking with Diageo for its globally-diversified earnings, cash generation and capital returns.