Diageo: Fears Of U.S. Slowdown After H1 Creating A Bargain
(Preview) Company Update (DGE LN) (Buy)
Summary
Diageo shares fell 5.5% after results last week and are at 20.7x CY22 EPS and 24.8x pre-COVID FY19 EPS. The Dividend Yield is 2.3%.
H1 FY23 results were strong, with organic growth of nearly 10% in Net Sales and EBIT, but sales growth in North America was just 3%.
While investors fear a downturn, we are relatively sanguine because Diageo's premium-led sales growth should be resilient.
North America's growth since FY19 has been reasonable, Europe was resilient in H1 despite weak macro, and China is reopening.
With shares at 3,445.0p, we expect a total return of 69% (17.1% annualized) by June 2026, in about 3.5 years. Buy.
Introduction
Diageo plc released their H1 FY23 results last Thursday (January 26), and shares fell 5.5% in London that day. Diageo shares have now fallen 8.0% in U.K. pounds in the past year; and back to the level of their pre-COVID peak in August 2019.
H1 FY23 results were strong. Net Sales and Adjusted EBIT both grew by nearly 10% organically year-on-year, and curre…