Gevo shares jump as Q3 results top estimates, posts positive EBITDA
Investing.com - Bernstein has reduced its price target on Diageo PLC (LON:DGE) (NYSE:DEO) to GBP24.20 from GBP25.50 while maintaining an Outperform rating on the spirits maker. Currently trading at $87.26, Diageo appears undervalued according to InvestingPro analysis, despite having fallen 28.55% year-to-date.
The price target adjustment follows Diageo’s Q1 FY26 results, which showed flat organic sales growth that slightly exceeded market expectations, but came with lowered full-year guidance.
Diageo has revised its FY26 outlook to flat or slightly declining organic top-line growth, compared to its previous flat growth forecast, while organic EBIT guidance was adjusted to low-to-mid single digit percentage growth from mid-single digit growth previously. Despite these challenges, the company maintains a 5.68% dividend yield and posted 53.99% dividend growth in the last twelve months.
Bernstein cited weakness in the U.S. and China markets as key factors behind its decision to trim earnings per share estimates by 2.2% for FY26 and 3.4% for FY27, while also lowering its forward price-to-earnings multiple to 17.8x from 18.4x. Diageo currently trades at a P/E ratio of 20.95, with analysts setting price targets ranging from $99 to $137, suggesting potential upside. InvestingPro offers deeper insights with comprehensive Pro Research Reports available for Diageo and 1,400+ other top stocks.
The spirits company has not yet announced a successor for its CEO position, with Bernstein noting the recent conference call was "long on aspiration but lighter on sell-out trends" and specific actions to address mounting market share challenges in the United States.
In other recent news, Diageo PLC reported a second-half organic sales growth of 2.3%, with earnings per share reaching $0.66. Although earnings per share fell by 7%, they performed slightly above consensus expectations. In response to these developments, TD Cowen adjusted its price target for Diageo to GBP22.75 from GBP24.50, maintaining a Hold rating due to weak spirits demand. Meanwhile, Deutsche Bank also revised its price target for Diageo, lowering it to GBP20.20 from GBP20.60, while keeping a Hold rating. This adjustment came after discussions with Diageo’s interim CEO, who expressed optimism about the company’s new management. On a different note, Goldman Sachs upgraded Diageo’s stock rating from Sell to Neutral, setting a price target of GBP20.00. This upgrade was based on the new management’s cost-saving strategies aimed at stabilizing earnings and enhancing margins, despite the low visibility of future outcomes.
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