- Diageo
- 06 January 2026 07:54:08
Source: Sharecast
The bank said Diageo enjoys an "enviable stable" of brands across multiple price points.
"We think that reviving the neglected mainstream is the key to Diageo rediscovering sustainable volume growth, albeit this will come at a cost to price/mix (we assume flat in 2027E) and margins (-210bps in 2027E), notwithstanding plentiful cost saving opportunities," it said.
"Cash flow should be largely insulated as excess maturing inventory is run down and capital expenditure reverts to the pre-existing norm before Diageo began to plan for 5-7% growth indefinitely."
RBC said it hasn’t included the disposal of Diageo's Moët Hennessy stake in its forecasts, but it wouldn't be averse to it.
"Our adjusted present value derived price target is unchanged at £20," the bank said. "We believe that if we are on the right sort of track, investors will rerate the lower earnings per share that we anticipate, reflecting improved confidence and visibility. Consequently, we raise our rating to outperform."