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Analysts Forecast Growth For Liquor Producer Diageo

Analysts Forecast Growth For Liquor Producer Diageo

After some recent setbacks, Diageo plc. (NYSE: DEO) is likely to see increased growth over the next two years, according to sell-side analysts. 

The Analysts

  • Goldman Sachs analyst Mitch Collett upgraded Diageo from Neutral to Buy.
  • Argus analyst John Staszak initiated coverage of Diageo with a Buy rating and $168 price target.

The Thesis

In 2017, Diageo purchased George Clooney’s tequila brand Casamigos, giving it access to Clooney as well as their other A-list celebrities like David Beckham and Sean Combs as brand representatives. That alone is arguably worth the $1 billion spent. 

Diageo’s organic sales growth will accelerate in the next few years, Collett said in the upgrade note. (See the analyst's track record here.) 

Casamigos is boosting Diageo's U.S. growth, the analyst said. 

The spirits producer reported 4.3-percent growth in 2016-2017, and Collett predicts 5.6-percent growth going into 2019-2020.

Another optimistic factor working in Diageo's favor is its continued production of “aged spirits,” with exposure to whiskey, Irish cognac, scotch and tequila being more favorable than unaged spirits. 

Similarly, Argus analyst Staszak has optimistic views of the brand’s future and encourages investors to buy in. Staszak’s reasoning is driven by a positive view of Diageo's overall branding, its top position in the spirits industry, low cost structure and strong networking. (See the analyst's track record here.) 

“Over the last several years, the company has generated above-peer-average revenue growth by working closely with bars, restaurants and retailers on pricing and promotions. Looking ahead, we also expect the company to benefit from its large dedicated sales force in the U.S., as well as from its increasing investments in emerging markets." 

Price Action

Diageo shares were up 0.38 percent at $148.04 at the time of publication Friday.

Related Links:

Diageo's Rally Has Come To An End, Bernstein Says In Downgrade

A Bullish Setup In Diageo

Latest Ratings for DEO

Nov 2020Morgan StanleyUpgradesEqual-WeightOverweight
Oct 2020B of A SecuritiesReinstatesBuy
Oct 2020JefferiesUpgradesUnderperformBuy

View More Analyst Ratings for DEO
View the Latest Analyst Ratings


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