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Investing.com - Deutsche Bank (ETR:DBKGn) has lowered its price target on Diageo PLC (LON:DGE) (NYSE:DEO) to GBP20.20 from GBP20.60 while maintaining a Hold rating on the spirits maker. The stock, currently trading at $109, sits between analyst targets ranging from $99 to $135, with a consensus rating of 2.38 (Hold). According to InvestingPro analysis, Diageo appears undervalued based on its Fair Value metrics.
The bank’s adjustment follows meetings with Diageo’s interim CEO Nik Jhangiani in London, where the executive expressed confidence that the company is "getting its Mojo back" with new management injecting energy into the business. The $60.5B market cap company maintains solid fundamentals with a 60.7% gross profit margin and an overall Financial Health score of "FAIR" from InvestingPro.
Deutsche Bank noted a "step change in the quality and clarity of the message from the company" and highlighted management’s confident stance on increased cost savings targets.
The bank pointed out that fiscal year 2026 may see lower reinvestment levels due to headwinds from tariffs, with marketing expenditure falling under the company’s cost focus initiatives.
Deutsche Bank indicated that removing non-working spend could potentially allow Diageo to reduce marketing costs by approximately 10%, though the company has not provided specific guidance on marketing percentages or absolute numbers.
In other recent news, Diageo PLC reported a second-half organic sales growth of 2.3% and earnings per share of $0.66, which, despite falling 7%, slightly exceeded consensus expectations. The company is also preparing to announce its fiscal year 2025 results with projections of a 1.4% organic sales growth, showing improvement from earlier in the year. In terms of analyst opinions, Goldman Sachs upgraded Diageo’s stock rating to Neutral, highlighting the new management’s cost-saving measures aimed at stabilizing earnings. Meanwhile, TD Cowen lowered its price target to GBP22.75, maintaining a Hold rating due to weak spirits demand. Similarly, BofA Securities reduced its price target to GBP22.00 but kept a Buy rating, anticipating a sequential improvement in sales growth. BofA also reiterated a Buy rating with a GBP24.50 target, following a Guinness Investor Event showcasing Diageo’s strategic plans and the newly launched Accelerate program, which aims for significant cost savings and cash flow. Deutsche Bank adjusted its price target to GBP19.60 while maintaining a Hold rating, noting Diageo’s third-quarter organic sales growth of 5.9% benefited from favorable phasing. These developments reflect a mix of cautious optimism and strategic adjustments by Diageo and analysts.
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