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1. Company Snapshot

1.a. Company Description

Diageo 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.

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1.b. Last Insights on DGE

Diageo's recent performance has been negatively impacted by weakness in the US and China, leading to a lowering of guidance for the 2026 fiscal year. Organic net sales growth is expected to be flat to slightly down, while organic operating profit growth is anticipated to be in the low to mid-single digit range. The company's CEO uncertainty and Trump-era tariffs have also clouded its full-year forecast. Additionally, Fitch Ratings revised its outlook on Diageo to negative from stable. A new CEO appointment has been made.

1.c. Company Highlights

2. Diageo's Mixed H1 Fiscal '25: Resilience Amidst Macro Headwinds

Diageo reported a mixed performance in the first half of fiscal 2025, navigating through a challenging macroeconomic landscape. Organic net sales grew 1%, driven by price/mix improvements, though this growth was somewhat offset by volume declines. The company's gross margin saw a modest improvement, while the operating margin faced pressure, with organic operating profit declining 1.2%. Notably, this decline would have been slightly positive excluding one-off incentives. Earnings per share (EPS) pre-exceptionals dropped nearly 10% year-over-year, impacted by unfavorable foreign exchange effects and the non-controlling stake in Moët Hennessy. Free cash flow was a bright spot, increasing by $125 million to $1.7 billion, supported by working capital improvements.

Publication Date: Feb -25

📋 Highlights
  • Top-line growth momentum: Delivered 1% organic net sales growth, driven by price/mix, with market share gains or holds in 65% of measured markets.
  • Regional performance: North America returned to slight growth, Europe remained resilient, and Africa delivered strong organic growth, while Asia Pacific and Latin America faced macro challenges.
  • Brand performance highlights: Tequila organic sales grew 21% (Don Julio and Don Julio Reposado standout), Guinness delivered 17% growth, while Scotch declined 5% due to softness in North America and China.
  • Profitability and margins: Organic operating profit declined 1.2%, but excluding one-offs, profit would have been slightly positive; gross margin improved, and A&P investment declined 2%.
  • Financials and cash flow: Free cash flow increased by $125 million to $1.7 billion, driven by working capital improvements, while net debt rose to $21.7 billion due to share buybacks.

Regional and Category Performance

Geographically, Diageo experienced varied results. North America returned to slight growth, with strong performance in premium spirits, particularly in Tequila and Whiskey categories. Crown Royal and Don Julio stood out, with Don Julio Reposado achieving over 100% organic growth. Guinness continued its impressive run, delivering 17% organic growth, driven by strong demand in Europe and growing traction in North America. However, Scotch faced a 5% decline in organic net sales, primarily due to weaker performance in North America and Greater China. Despite this, the company managed to gain quality share in key Scotch markets.

Strategic Initiatives and Outlook

Nik Jhangiani, the new CFO, highlighted the company's strategic priorities, including deleveraging to enhance financial flexibility and driving top-line growth through productivity and efficiency savings. The company is also focusing on innovation and targeted investments in high-growth categories, such as Tequila, where organic net sales grew 21%. Diageo is contingency planning to mitigate the impact of the U.S. tariffs on imports from Canada and Mexico, which could affect Tequila and Canadian Whiskey. The company is leveraging pricing, inventory management, and supply chain optimization to navigate this uncertainty.

Valuation and Shareholder Returns

From a valuation perspective, Diageo currently trades at a trailing price-to-earnings (P/E) ratio of 12.33 and a price-to-book (P/B) ratio of 6.19, reflecting its premium valuation. The company's dividend yield of 3.61% remains attractive, especially given its commitment to growing the dividend. However, the net debt-to-EBITDA ratio of 2.61x highlights the need for deleveraging. The company's focus on free cash flow yield of 5.54% and return on equity (ROE) of 50.44% underscores its commitment to maximizing shareholder returns. Despite the uncertain macro environment and tariff headwinds, Diageo's diversified portfolio and strategic initiatives position it well to outperform in the long term.

3. NewsRoom

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SMIRNOFF ICE AND POP ICON TROYE SIVAN ARE UNWRAPPING A HOLIDAY SEASON THAT'S ANYTHING BUT SILENT

Dec -04

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Sprinklr (CXM) Is Up 7.8% After Raising 2026 Revenue Outlook And Expanding SAMY Partnership – What's Changed

Dec -04

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Is Diageo a Long Term Opportunity After a 50% Slide and DCF Upside?

Dec -03

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Patrick Schwarzenegger Returns as Ketel One Vodka's 'Spirit Advisor' to Toast the Season's Signature Moments

Dec -02

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Diageo plays down Guinness shortage as strike planned for Belfast

Nov -28

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European beverage stocks trades at deep discounts

Nov -28

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Diageo plays down Guinness shortage as strike planned for Belfast

Nov -28

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Britain faces threat of Guinness Zero shortage over Christmas

Nov -28

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.98%)

6. Segments

North America

Expected Growth: 5.5%

Diageo plc’s North America segment is expected to grow driven by increasing demand for premium spirits, particularly in the whiskey and tequila categories, as well as strategic partnerships and acquisitions.

Europe

Expected Growth: 4.5%

Premiumisation and innovation in whisky and gin, driven by consumer demand for premium products, will drive growth in Diageo's Europe segment.

Asia Pacific

Expected Growth: 5.1%

Premiumisation, innovation and penetration in growing markets such as China, India and Vietnam drives Diageo’s Asia Pacific segment growth.

Latin America and Caribbean

Expected Growth: 5.3%

Growing middle class, increasing demand for premium spirits, and strategic partnerships drive Diageo’s growth in Latin America and the Caribbean.

Africa

Expected Growth: 5.4%

Diageo’s Africa segment is driven by growing middle-class consumers and increasing beer consumption. The company’s strong brand portfolio, including Guinness, will benefit from investments in marketing and distribution.

Supply Chain and Procurement (SC&P)

Expected Growth: 4.5%

Diageo's Supply Chain and Procurement segment is expected to grow driven by increasing demand for premium spirits, strategic partnerships, and investments in digitalisation and sustainability initiatives.

Corporate and Other

Expected Growth: 4.3%

Diageo plc's Corporate and Other segment is expected to grow driven by strategic cost savings, improved operating efficiencies, and a focus on sustainable growth initiatives, which will partially offset the impact of non-operating items.

Eliminate Inter-Segment Sales

Expected Growth: 5.5%

Diageo's growth is driven by premiumisation, innovation and expansion in emerging regions, with spirits, particularly scotch and tequila, being key contributors.

7. Detailed Products

Johnnie Walker

A Scotch whisky brand that offers a range of blends and single malts

Smirnoff

A vodka brand that offers a range of flavors and styles

Guinness

A stout beer brand that offers a rich, smooth, and creamy drinking experience

Baileys

A cream liqueur brand that offers a range of flavors and styles

Captain Morgan

A rum brand that offers a range of flavors and styles

Tanqueray

A gin brand that offers a range of flavors and styles

Cîroc

A vodka brand that offers a range of flavors and styles

8. Diageo plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Diageo plc has a diverse portfolio of brands, which reduces the threat of substitutes. However, the increasing popularity of craft spirits and the rise of low-alcohol and non-alcoholic beverages pose a moderate threat.

Bargaining Power Of Customers

Diageo plc's customers, primarily retailers and wholesalers, have limited bargaining power due to the company's strong brand portfolio and global distribution network.

Bargaining Power Of Suppliers

Diageo plc's suppliers, primarily agricultural producers and packaging providers, have limited bargaining power due to the company's large scale and diversified supply chain.

Threat Of New Entrants

The spirits industry has high barriers to entry, including significant capital requirements, complex regulatory environments, and established distribution networks, making it difficult for new entrants to compete with Diageo plc.

Intensity Of Rivalry

The spirits industry is highly competitive, with several large players, including Pernod Ricard and Bacardi, competing for market share and premium positioning.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 67.84%
Debt Cost 5.60%
Equity Weight 32.16%
Equity Cost 5.60%
WACC 5.60%
Leverage 210.97%

11. Quality Control: Diageo plc passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Imperial Brands

A-Score: 7.7/10

Value: 5.8

Growth: 5.3

Quality: 6.3

Yield: 9.4

Momentum: 9.5

Volatility: 9.7

1-Year Total Return ->

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Ahold Delhaize

A-Score: 6.9/10

Value: 7.1

Growth: 5.8

Quality: 5.0

Yield: 6.2

Momentum: 7.5

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Coca-Cola Europacific Partners

A-Score: 6.0/10

Value: 3.6

Growth: 6.0

Quality: 5.0

Yield: 6.2

Momentum: 10.0

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Henkel

A-Score: 5.6/10

Value: 6.0

Growth: 4.1

Quality: 6.9

Yield: 5.0

Momentum: 1.5

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Diageo

A-Score: 5.1/10

Value: 4.2

Growth: 5.6

Quality: 6.1

Yield: 6.2

Momentum: 0.5

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
Pernod Ricard

A-Score: 4.5/10

Value: 4.6

Growth: 3.3

Quality: 5.6

Yield: 6.2

Momentum: 0.0

Volatility: 7.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

16.7$

Current Price

16.7$

Potential

-0.00%

Expected Cash-Flows