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On Tuesday, Deutsche Bank (ETR:DBKGn)’s analysis led to a revised price target for Diageo PLC (LON:DGE:LN) (NYSE: DEO), a leading beverage company with a $63.17 billion market capitalization. Analyst Mitch Collett adjusted the target to GBP19.60 from the previous GBP20.20 while sustaining a Hold rating on the stock. The adjustment follows Diageo’s announcement of its third-quarter fiscal year 2025 organic sales growth, which was reported at 5.9%. According to InvestingPro data, the stock appears slightly undervalued based on its Fair Value analysis, with analyst targets ranging from $99 to $149.
Diageo’s recent performance exceeded the low-to-mid single-digit growth expected by the buy-side, despite the absence of a viable consensus. The company acknowledged that the third quarter benefited from favorable phasing, which contributed approximately 4% to the organic sales growth. This indicates that the underlying growth rate stood at around 2%. With annual revenue of $20.21 billion and a healthy gross profit margin of 60.56%, Diageo maintains a strong market position. InvestingPro analysis reveals a FAIR Financial Health Score of 2.38, suggesting stable operational performance.
The company has reiterated its fiscal year 2025 guidance, expecting a sequential improvement in organic sales growth. However, it also anticipates an organic operating profit decline that is broadly in line with the first half of the year. The guidance suggests an approximate 1% growth in organic sales and a 1% decline in organic operating profit for the fiscal year 2025. These figures slightly deviate from the current consensus, which predicts a 1.5% increase in sales and a 1.3% decrease in operating profit.
Despite Diageo’s solid third-quarter performance, Deutsche Bank cautions that the consensus for fiscal year 2026 might be overly optimistic. Analysts project a 4% growth in both organic sales and operating profit for the following year. However, given the challenging and uncertain operating environment, these expectations may not be fully realized. Trading at a P/E ratio of 17.6 and offering a 2.78% dividend yield, Diageo’s stock price and future performance remain a subject of close observation as the market responds to these developments. For deeper insights into Diageo’s valuation and growth prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports.
In other recent news, Diageo PLC has been the focus of analyst activity, with significant updates from both Berenberg and Deutsche Bank. Berenberg initiated coverage on Diageo with a Buy rating, setting a price target of GBP23.72. The firm noted Diageo’s strong return on invested capital and its ability to manage tariff risks, despite economic pressures such as rising US bond yields and tempered earnings expectations. Meanwhile, Deutsche Bank upgraded Diageo from a "Sell" to a "Hold" rating, maintaining a price target of GBp20.20. This revision reflects a change in perspective after observing Diageo’s stock underperformance relative to several indices. Deutsche Bank acknowledged the company’s strong fundamentals but also pointed out near-term risks and structural challenges. These recent developments highlight differing analyst perspectives on Diageo’s market position and potential for investors. Both firms recognize Diageo’s robust market presence, although they vary in their assessments of the immediate financial outlook.
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