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Macquarie: Diageo Poised For Higher American Sales, Market Share

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Macquarie: Diageo Poised For Higher American Sales, Market Share

After chatting with the British alcoholic beverage maker Diageo plc (NYSE: DEO)'s management, Macquarie Research maintained its bullish stance on the stock. 

The Analyst

Analyst  Caroline Levy maintains an Outperform on Diageo's London-listed stock with an unchanged 31-pound ($39.02) price target.

The Thesis

Diageo confirmed with Macquarie on a conference call that it expects its U.S. sales and share gain momentum to continue into 2019, Levy said in a Friday note. (See her track record here.) 

The company should be able to show 4-percent growth in 2019 in the North American market, which accounts for 35 percent of total sales and more than 45 percent of total profit, the analyst said. 

Diageo's sale of multiple alcohol brands to Sazerac should add 30 basis points to North American sales growth, although the move will be margin dilutive in the near-term by 70 basis points, Levy said. The divested brands account for 4 percent of total North American sales, and Diageo plans to allocate the proceeds from sale for share buybacks, she said. 

Diageo is making proper use of data and analytics that will result in better choices on pricing, marketing, promotions and product pipeline, in Macquarie's view.

For example, the launch of Ketel One Botanicals should be well-received by calorie-conscious drinkers who gravitate toward spiked seltzer. The company is also targeting the Baltimore area after using data from the Open Gate brewery to sell new beer lines.

Price Action

Diageo's U.S.-listed stock was down 1.79 percent at $141.39 at the close Friday. 

Related Links:

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Latest Ratings for DEO

DateFirmActionFromTo
Sep 2019UpgradesUnderperformMarket Perform
Sep 2019AssumesSell
Jul 2018UpgradesNeutralBuy

View More Analyst Ratings for DEO
View the Latest Analyst Ratings

Posted-In: alcohol Beer beverages Caroline LevyAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

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