Diageo (DEO) AI Stock Analysis

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Diageo

(NYSE:DEO)

Rating:68Neutral

Price Target:

$124.00

▲(11.55% Upside)

Diageo's overall stock score reflects strong revenue growth and positive market momentum, but is tempered by declining profitability, high leverage, and valuation concerns. The earnings call provided a mixed outlook with both growth opportunities and significant risks, particularly related to tariffs and debt levels.

Diageo (DEO) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$61.67B

Dividend Yield3.72%

Average Volume (3M)1.47M

Price to Earnings (P/E)26.7

Beta (1Y)0.63

Revenue Growth0.22%

EPS Growth-38.76%

CountryUS

Employees30,092

SectorConsumer Defensive

Sector Strength49

IndustryBeverages - Wineries & Distilleries

Share Statistics

EPS (TTM)2.64

Shares Outstanding556,334,350

10 Day Avg. Volume1,149,007

30 Day Avg. Volume1,474,106

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market Cap1.30

Enterprise Value/Revenue3.93

Enterprise Value/Gross Profit6.54

Enterprise Value/Ebitda16.22

Forecast

1Y Price Target

$124.00

Price Target Upside11.55% Upside

Rating ConsensusHold

Number of Analyst Covering1

Diageo Business Overview & Revenue Model

Company DescriptionDiageo plc, together with its subsidiaries, produces, markets, and sells alcoholic beverages. The company offers scotch, whisky, gin, vodka, rum, ready to drink products, raki, liqueur, wine, tequila, Canadian whisky, American whiskey, cachaca, and brandy, as well as beer, including cider and non-alcoholic products. It provides its products under the Johnnie Walker, Crown Royal, Bulleit and Buchanan's whiskies, Smirnoff, Cîroc and Ketel One vodkas, Casamigos, DeLeon and Don Julio tequilas, Captain Morgan, Baileys, Tanqueray, and Guinness brands. The company operates in North America, Europe, Turkey, Africa, Latin America, the Caribbean, the Asia Pacific, and internationally. The company was incorporated in 1886 and is headquartered in London, the United Kingdom.

How the Company Makes MoneyDiageo makes money primarily through the production, distribution, and sale of its wide range of alcoholic beverages. The company's revenue model is largely driven by its portfolio of premium and super-premium brands, which command higher price points and profit margins. Diageo's key revenue streams include sales from its spirits, beer, and wine segments, with spirits contributing the largest share of total revenue. The company also benefits from strategic partnerships and acquisitions, which help to expand its brand portfolio and market presence. Diageo's global reach and strong brand recognition enable it to capitalize on consumer trends and preferences, driving consistent revenue growth.

Diageo Key Performance Indicators (KPIs)

Any

Adjusted Operating Profit by Geography

Adjusted Operating Profit by Geography
Reveals profitability across different regions, highlighting where Diageo is most efficient and where it might improve margins, crucial for assessing regional performance and strategic focus.

Chart InsightsDiageo's adjusted operating profit shows volatility across regions, with North America maintaining a leading position despite recent declines. Europe and APAC exhibit significant fluctuations, suggesting sensitivity to economic or market conditions. LATAM & Caribbean and Africa face challenges, with profits dipping sharply mid-year. The absence of earnings call insights leaves questions about strategic responses to these trends, but the data indicates a need for targeted regional strategies to stabilize and enhance profitability.

Data provided by:

Main Street Data

Diageo Earnings Call Summary

Earnings Call Date:Aug 05, 2025

(Q2-2025)

% Change Since: |

Next Earnings Date:Jan 29, 2026

Earnings Call Sentiment Neutral

The earnings call presented a mix of positive and negative elements. While the company showed a return to organic net sales growth, market share gains, and strong performance in key segments like Tequila and Guinness, it also faced challenges such as a decline in Scotch sales, operating profit, the impact of new tariffs, and a drop in EPS. The uncertainty around tariffs adds complexity to the business outlook.

Q2-2025 Updates

Positive Updates

Organic Net Sales Growth

The company returned to organic net sales growth of 1% in the first half of fiscal '25, 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 share gains in the U.S., most of Europe, and Greater China.

Tequila and Guinness Performance

Tequila organic net sales were up 21%, with Don Julio leading the growth. Guinness achieved its 8th consecutive half of double-digit growth, delivering 17% organic net sales growth.

Free Cash Flow Improvement

Free cash flow increased by $125 million to approximately $1.7 billion, driven by working capital management.

Negative Updates

Scotch Sales Decline

Scotch organic net sales declined by 5%, largely driven by softer industry performance in North America and Greater China.

Operating Profit Decline

Organic operating profit declined 1.2%, impacted by increased overheads, staff costs, and strategic investments.

Impact of Tariffs

25% tariffs on goods imported into the U.S. from Canada and Mexico create uncertainty, potentially impacting input costs for tequila and Canadian whiskey.

EPS Decline

Pre-exceptional EPS declined about 10%, primarily due to the performance of Moet Hennessy and unfavorable foreign exchange.

Company Guidance

In the first half of fiscal year 2025, Diageo reported a 1% growth in organic net sales, with significant contributions from the North American and Latin American regions. Market share was either held or increased in 65% of measured markets, notably in North America and Greater China. Despite a challenging macroeconomic environment and recent tariff announcements, the company maintained a strong performance in various categories, including Tequila, which saw a 21% rise in organic net sales. Guinness continued its momentum with 17% growth, marking its eighth consecutive half of double-digit growth. However, Scotch faced a 5% decline due to softer industry performance. The company's strategic investments in digital and market routes are aimed at enhancing financial resilience and achieving sustainable long-term growth. Diageo's focus remains on driving stronger execution and leveraging its diverse portfolio to respond to emerging consumer trends across regions.

Diageo Financial Statement Overview

Summary

Diageo shows strong revenue growth but faces challenges with declining profitability and high leverage. The significant drop in free cash flow raises concerns about future investments. While growth potential exists, addressing profitability and leverage is crucial for financial stability.

Income Statement

Positive

Diageo has shown a strong revenue growth rate of 18.3% in the latest year, indicating robust sales performance. However, the net profit margin has decreased from 19.1% to 11.6%, suggesting a decline in profitability. The EBIT and EBITDA margins have also contracted, pointing to increased operational costs or pricing pressures.

Balance Sheet

Positive

The company maintains a high debt-to-equity ratio of 2.20, which indicates significant leverage and potential financial risk. Return on equity has decreased to 21.2%, reflecting reduced profitability relative to shareholder equity. The equity ratio remains stable, suggesting a balanced asset structure.

Cash Flow

Neutral

Free cash flow has declined significantly by 51.8%, which could impact future investment capabilities. The operating cash flow to net income ratio is 0.40, indicating moderate cash generation relative to earnings. The free cash flow to net income ratio is 0.62, showing a reasonable conversion of profits into cash.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	20.33B	20.25B	20.27B	20.55B	15.45B	12.73B
Gross Profit	12.22B	12.17B	12.20B	12.27B	9.48B	7.70B
EBITDA	4.93B	6.36B	7.24B	8.06B	4.93B	4.20B
Net Income	2.36B	2.35B	3.87B	4.45B	3.94B	2.66B
Balance Sheet
Total Assets	49.32B	49.32B	45.47B	44.88B	36.52B	31.95B
Cash, Cash Equivalents and Short-Term Investments	2.72B	2.65B	1.13B	1.81B	2.54B	2.87B
Total Debt	23.75B	24.40B	21.50B	20.79B	16.02B	14.73B
Total Liabilities	36.14B	36.14B	33.40B	33.17B	27.00B	23.52B
Stockholders Equity	11.09B	11.09B	10.03B	9.86B	7.80B	6.90B
Cash Flow
Free Cash Flow	3.60B	2.69B	4.55B	4.33B	2.84B	3.03B
Operating Cash Flow	5.22B	4.30B	6.07B	5.74B	3.94B	3.65B
Investing Cash Flow	-1.74B	-1.72B	-1.59B	-1.43B	-1.34B	-1.09B
Financing Cash Flow	-1.50B	-1.49B	-3.11B	-3.04B	-3.26B	-2.79B

Diageo Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price111.16

Price Trends

50DMA

105.54

Positive

100DMA

107.77

Positive

200DMA

111.47

Positive

Market Momentum

MACD

2.35

Negative

RSI

57.25

Neutral

STOCH

39.08

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DEO, the sentiment is Neutral. The current price of 111.16 is above the 20-day moving average (MA) of 109.14, above the 50-day MA of 105.54, and below the 200-day MA of 111.47, indicating a bullish trend. The MACD of 2.35 indicates Negative momentum. The RSI at 57.25 is Neutral, neither overbought nor oversold. The STOCH value of 39.08 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
BUD	75 Outperform	$123.80B	17.51	8.97%	1.67%	-2.06%	21.03%
ABEV	73 Outperform	$35.30B	13.61	15.08%	2.05%	-0.79%	-10.83%
BF.B	70 Outperform	$14.14B	16.89	23.14%	2.95%	-4.90%	-14.49%
BF.A	69 Neutral	$14.14B	16.98	23.14%	2.99%	-4.90%	-14.49%
DEO	68 Neutral	$61.67B	26.69	22.33%	3.72%	0.22%	-38.76%
Sector *	63 Neutral	$20.46B	14.51	-3.60%	3.15%	2.60%	-5.31%
STZ	62 Neutral	$27.92B	49.10	-5.05%	2.53%	-0.47%	-117.62%

* Consumer Defensive Sector Average

Performance Comparison

DEO

Diageo

112.03

-16.65

-12.94%

BUD

Anheuser-Busch Inbev Sa

62.79

2.07

3.41%

BF.A

Brown Forman A

30.78

-13.40

-30.33%

STZ

Constellation Brands

160.50

-74.76

-31.78%

BF.B

Brown-Forman B

30.45

-13.33

-30.45%

ABEV

Ambev SA

2.21

0.05

2.31%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Aug 20, 2025