Diageo stock price target lowered to GBP22.00 from GBP24.50 at BofA

Investing.com - BofA Securities lowered its price target on Diageo PLC (LON:DGE) (NYSE:DEO) to GBP22.00 from GBP24.50 while maintaining a Buy rating ahead of the company’s upcoming fiscal year 2025 results. According to InvestingPro data, the stock currently trades near its 52-week low of $99.26, with analyst targets ranging from $100 to $145.

The spirits maker is scheduled to report its FY25 results on Tuesday, August 5, with BofA expecting organic sales growth of 1.4%, showing sequential improvement from the 1.0% growth reported in the first half of the year. The company maintains strong fundamentals with a robust gross profit margin of 60.6% and an attractive dividend yield of 3.1%.

BofA forecasts an organic EBIT decline of 0.7% with margins contracting by 60 basis points, which would be slightly better than the company’s guidance for an EBIT decline in line with the first half’s 1.2% drop.

The firm projects Diageo’s earnings per share to reach 161p, representing a 10% year-over-year decline, affected by foreign exchange headwinds and a sharp reduction in Moet Hennessy associate income.

BofA anticipates Diageo will generate $2.3 billion in free cash flow this fiscal year, with a net debt to EBITDA ratio of 3.4x by June 2025, while maintaining its dividend at $1.035.

In other recent news, Diageo PLC has been the focus of analysts’ attention following its latest financial and strategic updates. The company reported a 5.9% organic sales growth for the third quarter of its fiscal year 2025, surpassing the expected low-to-mid single-digit growth. This performance was partly attributed to favorable phasing, which added approximately 4% to the growth rate, leaving the underlying growth at about 2%. Diageo has maintained its guidance for fiscal year 2025, projecting a 1% growth in organic sales and a 1% decline in organic operating profit, slightly below the consensus estimates.

BofA Securities has reiterated its Buy rating on Diageo with a price target of GBP24.50, expressing optimism about the company’s strategic initiatives and brand strength, particularly with Guinness. The firm’s analyst emphasized Diageo’s efforts to enhance efficiency and cash generation through its newly launched Accelerate program, aiming for $500 million in savings over three years. Conversely, Deutsche Bank (ETR:DBKGn) has adjusted its price target for Diageo to GBP19.60 while maintaining a Hold rating, noting the company’s third-quarter performance but cautioning against overly optimistic expectations for fiscal year 2026. Analysts at Deutsche Bank highlight potential challenges in achieving the projected 4% growth in both organic sales and operating profit for the next year. These recent developments indicate a mixed sentiment among analysts regarding Diageo’s financial outlook and strategic direction.

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