Diageo (DEO) 1H20 Earnings Solid, Stock Hit By View Cut
Zacks Investment Research | Jan 30, 2020 10:12PM ET
Diageo (LON:DGE) plc (NYSE:DEO) reported interim results for the first half of fiscal 2020, ended Dec 31, 2019, wherein pre-exceptional earnings per share improved 4.2% year over year to 80.2 pence (in local currency). This was backed by higher operating profits and the capital return program.
Diageo’s stock dipped 1.5% yesterday after it cut the net sales view for fiscal 2020 on the ongoing trade conflicts in key markets and the spread of Coronavirus in China. The company expects the persistence of increased levels of volatility in India, Latin America and the Caribbean, and Travel Retail to hurt sales for fiscal 2020.
For fiscal 2020, it now expects net sales at the lower end of 4-6% growth mentioned earlier. The company had earlier expected sales growth at the mid-point of the aforementioned range. However, it continues to anticipate organic operating profit growth of about 1% ahead of organic net sales. This is consistent with its medium-term target stated earlier. Based on current rates, the company now expects foreign exchange to hurt net sales by £110 million and operating profit by £40 million in fiscal 2020.
Though shares of the Zacks Rank #4 (Sell) company have moved down 6.1% in the past three months, it fared better than the industry ’s decline of 10.1%. The alcohol giant is gaining from the focus on innovations, achieving growth through buyouts and penetration in emerging markets.
First-Half Fiscal 2020 Highlights
On a reported basis, net sales and operating profit moved up 4.2% and 0.5%, respectively, owing to organic growth. Top-line growth also included slight negative impacts of the sale of a portfolio of 19 brands to Sazerac in December 2018.
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