World: Diageo still getting downgrades following profit warnings last month

Diageo PLC is still getting downgrades following its warning last month, with both RBC and Deutsche Bank suggesting there is more disappointment to come from the beer and spirits group, Proactive Investors reported on December 4.

With its 5-7% revenue growth guidance under threat, the 5-7% profit growth goal is likewise too high, says RBC, adding that’s before even considering the prospect of additional excessive inventory in the supply chain.

If sales do undershoot, two big drivers of recent margin growth – operational gearing and mix from portfolio - will be much less of a factor.

In any event, Diageo’s credibility and investors' perception of the visibility/predictability of growth have been bruised.

RBC’s target price drops to £25 with an 'underperform' rating.

Deutsche Bank, too, is worried about the possibility of more downgrades to come, hence its 'sell' rating and target price of £24.70, down from £25.50p.

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