Diageo: Barclays initiates coverage as a buyer
(CercleFinance.com) - As part of a sector report on wines, spirits and European brewers, Barclays has begun its coverage of the Diageo share with a buy rating ("overweight").
However, note that its corresponding target price of 3,470 pence suggests upside potential of just 10%.
The main arguments: first include the United States, which Barclays says reflects about 27% of Diageo's sales, where it is the market leader. In this market, the group is expected to report growth of around 5%, thanks to demand for brands such as Crown Royal, Johnnie Walker, along with the tequilas, Don Julio and Casamigos.
Other arguments are that the group should take advantage of the "premiumisation," which also affects the Indian market, and the strong growth momentum in China, even though this country only currently represents about 4% of its total revenues.
Barclays anticipates that over the next three years, the British group is expected to be outperform industry sales growth by between 6% and 7%, with margins improving by 50 to 60 basis points. Analysts hence apply a sector premium of 10% to the share.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
However, note that its corresponding target price of 3,470 pence suggests upside potential of just 10%.
The main arguments: first include the United States, which Barclays says reflects about 27% of Diageo's sales, where it is the market leader. In this market, the group is expected to report growth of around 5%, thanks to demand for brands such as Crown Royal, Johnnie Walker, along with the tequilas, Don Julio and Casamigos.
Other arguments are that the group should take advantage of the "premiumisation," which also affects the Indian market, and the strong growth momentum in China, even though this country only currently represents about 4% of its total revenues.
Barclays anticipates that over the next three years, the British group is expected to be outperform industry sales growth by between 6% and 7%, with margins improving by 50 to 60 basis points. Analysts hence apply a sector premium of 10% to the share.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.