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No compelling case to own Diageo right now, says Citi
(Sharecast News) - Diageo's stock was underperforming the wider market on Monday, with comments from Citi likely weighing on sentiment after the bank said it doesn't see upside despite a big drop in the shares over the past year. The bank maintained a 'neutral' rating on the stock, which has fallen by 7% over the past six months and 24% over the past 12 months.
"The absence of new 2H24 trading negatives (especially in US spirits) has provided some comfort to investors and driven the stock from recent lows," said analyst Simon Hales.
However, the bank has cut its earnings per share forecasts over the next two years by 1.2% and 2.3%, respectively, due to currency movements and a lower association contribution.
"With [second-half] GBP-related FX tailwinds likely to unwind in 2025 and some risk of further reported EBIT trimming from biological asset revisions (agave), we think it is still tough to make a compelling case to own spirits/Diageo at present," Hales said.
The bank maintained its preference for the beer sector, along with beverage maker Campari Group.
Diageo's stock was up 1% at 2,864p by 0956 BST, compared with the FTSE 100 which was up 1.3%.
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