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Diageo Plc (DEO)
NYSE:DEO
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Diageo
(NYSE:DEO)
72Outperform
Diageo (DEO) vs. S&P 500 (SPY)
Market Cap
$59.80B
Dividend Yield3.62%
Average Volume (3M)1.35M
Price to Earnings (P/E)16.9
Beta (1Y)0.61
Revenue Growth-1.21%
EPS Growth-8.89%
CountryUS
Employees30,092
SectorConsumer Defensive
Sector Strength77
IndustryBeverages - Wineries & Distilleries
Share Statistics
EPS (TTM)3.91
Shares Outstanding556,317,900
10 Day Avg. Volume1,793,133
30 Day Avg. Volume1,345,337
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.94
Price to Cash Flow (P/CF)12.80
P/FCF Ratio13.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$140.00Price Target Upside23.59% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
Diageo Business Overview & Revenue Model
Company DescriptionDiageo plc is a British multinational beverage alcohol company, headquartered in London, England. It operates in the consumer goods sector and is renowned for its production and distribution of spirits, beer, and wine. Diageo's portfolio includes world-leading brands such as Johnnie Walker, Crown Royal, Bulleit, Smirnoff, Baileys, Captain Morgan, Tanqueray, and Guinness, among others. The company has a global presence in over 180 countries and operates through various subsidiaries and joint ventures, maintaining a strong market position across different regions.
How the Company Makes MoneyDiageo generates revenue primarily through the manufacturing, marketing, and selling of its diverse portfolio of alcoholic beverages. The company's key revenue streams include the sale of spirits, beer, and wine, with spirits accounting for the majority of its income. Diageo leverages its extensive distribution network to reach consumers via retail outlets, bars, and restaurants globally. The company also benefits from strategic partnerships and acquisitions that enhance its brand portfolio and expand its market reach. Premiumization, or the focus on selling higher-end products, is a significant factor in Diageo's earnings strategy, allowing the company to achieve higher margins. Additionally, Diageo invests in brand marketing and innovation to sustain consumer interest and adapt to changing market trends, contributing to its financial performance.
Diageo Financial Statement Overview
Summary
Diageo's financial performance is solid with strong profitability margins and effective cash flow management. The income statement shows stable gross and net profit margins, but revenue growth is slightly negative, which is an area of concern. The balance sheet suggests a high reliance on debt, which poses potential risks. Cash flow is robust, highlighting effective cash generation and conversion from income.Income Statement
Diageo's income statement reflects a stable financial performance with a strong gross profit margin of approximately 60.2% and a net profit margin of 19.1% for the most recent year. However, revenue growth has been somewhat stagnant between 2023 and 2024, with a slight decline of 1.4%. The EBIT and EBITDA margins are healthy at 32.6% and 35.1% respectively, showcasing good operating efficiency.75
Positive
Balance Sheet
The balance sheet indicates a moderate debt-to-equity ratio of 2.14, suggesting a reliance on debt financing, which could pose risks if not managed prudently. The return on equity is robust at 38.6%, indicating strong profitability from shareholder investments. The equity ratio is moderate at 22.1%, reflecting balanced leverage.70
Positive
Cash Flow
The cash flow statement shows a positive free cash flow and a growth rate of 16.7% from the previous year, highlighting effective cash generation. The operating cash flow to net income ratio stands at 1.06, reflecting solid cash conversion from profits. The free cash flow to net income ratio is 0.67, indicating a satisfactory conversion of income into free cash flow.78
Positive
| Breakdown | ||||
| Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 16.10B | 17.11B | 15.45B | 12.73B | 11.75B | Gross Profit |
| 9.74B | 10.21B | 9.48B | 7.70B | 7.10B | EBIT |
| 6.00B | 4.63B | 4.41B | 3.73B | 2.14B | EBITDA |
| 5.41B | 5.63B | 4.93B | 4.20B | 4.48B | Net Income Common Stockholders |
| 3.87B | 4.45B | 3.94B | 2.66B | 1.73B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.49B | 1.79B | 2.54B | 2.87B | 3.40B | Total Assets |
| 45.47B | 35.62B | 36.52B | 31.95B | 33.31B | Total Debt |
| 18.62B | 16.50B | 16.02B | 14.73B | 16.79B | Net Debt |
| 17.49B | 15.06B | 13.73B | 11.98B | 13.46B | Total Liabilities |
| 33.40B | 26.33B | 27.00B | 23.52B | 24.87B | Stockholders Equity |
| 7.94B | 7.82B | 7.80B | 6.90B | 6.77B |
| Cash Flow | Free Cash Flow | |||
| 2.06B | 1.84B | 2.84B | 3.03B | 1.62B | Operating Cash Flow |
| 3.26B | 3.02B | 3.94B | 3.65B | 2.32B | Investing Cash Flow |
| -1.44B | -1.20B | -1.34B | -1.09B | -805.00M | Financing Cash Flow |
| -2.46B | -2.41B | -3.26B | -2.79B | 1.04B |
Diageo Technical Analysis
Positive
113.28
Price Trends
108.56
Positive
113.42
Negative
119.82
Negative
Market Momentum
1.23
Negative
60.68
Neutral
78.47
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DEO, the sentiment is Positive. The current price of 113.28 is above the 20-day moving average (MA) of 109.07, above the 50-day MA of 108.56, and below the 200-day MA of 119.82, indicating a neutral trend. The MACD of 1.23 indicates Negative momentum. The RSI at 60.68 is Neutral, neither overbought nor oversold. The STOCH value of 78.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DEO.
Diageo Risk Analysis
Diageo disclosed 21 risk factors in its most recent earnings report. Diageo reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Diageo Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $131.02B | 22.58 | 7.31% | 0.98% | 0.64% | 10.02% | |
74 Outperform | $16.28B | 16.41 | 27.99% | 2.59% | -5.11% | 3.64% | |
72 Outperform | $59.80B | 16.92 | 35.83% | 3.62% | -1.21% | -8.89% | |
72 Outperform | $16.28B | 16.50 | 27.99% | 2.58% | -5.11% | 3.64% | |
68 Neutral | $11.10B | 10.76 | 8.54% | 3.11% | -0.64% | 22.45% | |
65 Neutral | $33.55B | 49.10 | -0.98% | 2.17% | 2.47% | -105.09% | |
64 Neutral | $8.88B | 14.97 | 4.71% | 174.26% | 3.67% | 4.40% |
* Consumer Defensive Sector Average
Performance Comparison
DEO
Diageo
113.28
-19.32
-14.57%
BUD
Anheuser-Busch Inbev Sa
66.01
6.42
10.77%
BF.A
Brown Forman A
34.32
-12.62
-26.89%
STZ
Constellation Brands
186.97
-65.28
-25.88%
TAP
Molson Coors
57.56
2.06
3.71%
BF.B
Brown-Forman B
34.50
-11.44
-24.90%
Diageo Earnings Call Summary
Earnings Call Date:Feb 04, 2025
(Q2-2025)
| % Change Since: -1.68%|
Next Earnings Date:Aug 05, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted a return to growth in organic net sales and market share gains in key regions. Strong performances in Tequila and Guinness, along with strategic investments, were positive aspects. However, the decline in operating profit, the impact of tariffs, and challenges in the Scotch category presented significant concerns. The uncertainty around tariffs and higher debt levels add complexity to the outlook.Q2-2025 Updates
Positive Updates
Return to Growth in Organic Net Sales
Despite a challenging macro environment, organic net sales grew by 1% with growth in four out of five regions, including North America.
Market Share Gains
Held or gained market share in 65% of net sales in measured markets, with strong performances in the U.S., Europe, and Greater China.
Tequila and Guinness Strong Performance
Tequila organic net sales were up 21%, led by Don Julio. Guinness achieved its 8th consecutive half of double-digit growth, with 17% organic net sales growth.
Strong Free Cash Flow
Free cash flow increased by $125 million to approximately $1.7 billion, driven by working capital management.
Digital and Route-to-Market Investments
Strategic investments in digital and route-to-market are progressing well, expected to drive future outperformance.
Negative Updates
Operating Profit Decline
Organic operating profit declined by 1.2%, impacted by increased overheads including staff costs and strategic investments.
Impact of Tariffs
The introduction of 25% tariffs on goods imported into the U.S. from Canada and Mexico creates additional uncertainty and could impact future growth.
Scotch Sales Decline
Scotch organic net sales declined by 5% due to softer industry performance in North America and Greater China.
EPS Decline
Pre-exceptional EPS declined about 10% primarily due to performance of non-controlling interests and unfavorable foreign exchange.
Higher Average Net Debt
Average net debt increased to $21.7 billion, with a leverage ratio of 3.1x, above the target range.
Company Guidance
In the recent call, Diageo shared a promising outlook despite ongoing macroeconomic challenges and geopolitical uncertainties, particularly in the U.S. due to new tariff announcements. The company reported a 1% growth in organic net sales in the first half of fiscal 2025, with market share gains in 65% of its net sales in measured markets. Notably, North America showed slight but meaningful sequential improvement, driven by strong performances from brands like Don Julio and Crown Royal. The company's operating profit declined by 1.2%, attributed to increased overhead costs, but saw a $125 million increase in free cash flow to approximately $1.7 billion. Diageo emphasized its focus on sustainable top-line growth, operating leverage, and maximizing free cash flow, while acknowledging the need to address its leverage ratio, which increased to 3.1x. Looking ahead, the company plans strategic investments and operational adjustments to navigate the evolving tariff situation while maintaining a commitment to shareholder returns through dividends and buybacks.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.