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Diageo (DEO) 1H18 Interim Earnings & Sales Up Year Over Year
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Diageo plc (DEO - Free Report) recently announced interim results for the half yearly period ended Jul 31, 2017. Pre-exceptional earnings per share for the first half of fiscal 2018 grew 9.4% (in local currency) year over year. The upside was backed by increased organic operating profit and reduced finance costs.
While Diageo’s stock didn’t react much to the announcement, shares of this Zacks Rank #2 (Buy) company have rallied 33.2% in a year, faring even better than the industry’s 26.1% surge. Clearly, this alcohol behemoth is riding on its focus on innovations, achieving growth through buyouts and penetration in emerging markets.
1H18 Highlights
On a reported basis, net sales as well as operating profits moved up 1.7% and 6.1%, respectively, courtesy of organic growth. However, this was somewhat countered by unfavorable currency fluctuations.
Broad-based organic sales increased 4.2%, backed by improved volumes and favorable price/mis. Also, all regions witnessed organic sales growth, driven by Diageo’s strong brand portfolio and solid reach. Further, organic volumes went up 1.8%.
Gross margin expanded nearly 200 basis points during the first half, as impacts from GST and inflation were more than offset by favorable mix, greater productivity and efforts like better pricing and lowering input costs to reduce the adverse impact of GST.
Additionally, organic operating profit advanced 6.7%, thanks to benefits from the company’s productivity program, partly negated by greater marketing investments. Organic margins rose 81 basis points.
Segment Details
Organic sales grew 2% in North America due to higher sales at U.S. Spirits which in turn was fueled by strength across all categories other than Vodka. Categorically, results were led by Don Julio in the Tequila category; North American whiskey; Captain Morgan in the Rum category and Baileys. Operating profit (organic) rose 3%.
In Europe, Russia and Turkey, organic sales increased 4% on greater volumes. Also, improved pricing in Turkey aided price mix, while it was partly offset by unfavorable mix from Gordon’s and Baileys in Europe. Organic operating profit in the region improved 12%.
Organic sales in Africa climbed 2%, driven by strong performance in Nigeria, which was partly hampered by softness in Africa Regional Markets and South Africa. Also, price/mix remained negative due to heightened competition in South Africa, accelerated growth in Mainstream Spirits across East Africa and Nigeria. This was somewhat compensated by favorable pricing in Nigeria. In Africa, operating profit (organic) fell 3%
Organic sales in the Latin America and Caribbean region ascended 7% backed by strong growth in Mexico and PUB. Results gained from strength across primary scotch brands, which delivered higher sales in Mexico, PUB and Colombia. However, price mix remained negative. Organic operating profit jumped 10%.
In the Asia Pacific region, organic sales gained 7%. Operating profit (organic) improved 17% in the region.
Financial Status
Diageo’s cash flows remained robust and in line with the year-ago period. Management raised the interim dividend (local currency) by 5%.
Outlook
Diageo continues to expect organic net sales for fiscal 2018 to improve in the mid-single digit. Also, the company expects margin growth of 175 bps over the three years ending on Jun 30, 2019.
Brown-Forman Corporation (BF.B - Free Report) , also boasting a Zacks Rank #1, has delivered back-to-back earnings surprises in the last two quarters.
Constellation Brands, Inc. (STZ - Free Report) , with a spectacular earnings surprise history and long-term earnings growth rate of 19% carries a Zacks Rank #2.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Diageo (DEO) 1H18 Interim Earnings & Sales Up Year Over Year
Diageo plc (DEO - Free Report) recently announced interim results for the half yearly period ended Jul 31, 2017. Pre-exceptional earnings per share for the first half of fiscal 2018 grew 9.4% (in local currency) year over year. The upside was backed by increased organic operating profit and reduced finance costs.
While Diageo’s stock didn’t react much to the announcement, shares of this Zacks Rank #2 (Buy) company have rallied 33.2% in a year, faring even better than the industry’s 26.1% surge. Clearly, this alcohol behemoth is riding on its focus on innovations, achieving growth through buyouts and penetration in emerging markets.
1H18 Highlights
On a reported basis, net sales as well as operating profits moved up 1.7% and 6.1%, respectively, courtesy of organic growth. However, this was somewhat countered by unfavorable currency fluctuations.
Diageo PLC Price, Consensus and EPS Surprise
Diageo PLC Price, Consensus and EPS Surprise | Diageo PLC Quote
Broad-based organic sales increased 4.2%, backed by improved volumes and favorable price/mis. Also, all regions witnessed organic sales growth, driven by Diageo’s strong brand portfolio and solid reach. Further, organic volumes went up 1.8%.
Gross margin expanded nearly 200 basis points during the first half, as impacts from GST and inflation were more than offset by favorable mix, greater productivity and efforts like better pricing and lowering input costs to reduce the adverse impact of GST.
Additionally, organic operating profit advanced 6.7%, thanks to benefits from the company’s productivity program, partly negated by greater marketing investments. Organic margins rose 81 basis points.
Segment Details
Organic sales grew 2% in North America due to higher sales at U.S. Spirits which in turn was fueled by strength across all categories other than Vodka. Categorically, results were led by Don Julio in the Tequila category; North American whiskey; Captain Morgan in the Rum category and Baileys. Operating profit (organic) rose 3%.
In Europe, Russia and Turkey, organic sales increased 4% on greater volumes. Also, improved pricing in Turkey aided price mix, while it was partly offset by unfavorable mix from Gordon’s and Baileys in Europe. Organic operating profit in the region improved 12%.
Organic sales in Africa climbed 2%, driven by strong performance in Nigeria, which was partly hampered by softness in Africa Regional Markets and South Africa. Also, price/mix remained negative due to heightened competition in South Africa, accelerated growth in Mainstream Spirits across East Africa and Nigeria. This was somewhat compensated by favorable pricing in Nigeria. In Africa, operating profit (organic) fell 3%
Organic sales in the Latin America and Caribbean region ascended 7% backed by strong growth in Mexico and PUB. Results gained from strength across primary scotch brands, which delivered higher sales in Mexico, PUB and Colombia. However, price mix remained negative. Organic operating profit jumped 10%.
In the Asia Pacific region, organic sales gained 7%. Operating profit (organic) improved 17% in the region.
Financial Status
Diageo’s cash flows remained robust and in line with the year-ago period. Management raised the interim dividend (local currency) by 5%.
Outlook
Diageo continues to expect organic net sales for fiscal 2018 to improve in the mid-single digit. Also, the company expects margin growth of 175 bps over the three years ending on Jun 30, 2019.
Looking for More? Check These Alcohol Stocks
The Boston Beer Company, Inc. (SAM - Free Report) with a splendid earnings surprise history flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brown-Forman Corporation (BF.B - Free Report) , also boasting a Zacks Rank #1, has delivered back-to-back earnings surprises in the last two quarters.
Constellation Brands, Inc. (STZ - Free Report) , with a spectacular earnings surprise history and long-term earnings growth rate of 19% carries a Zacks Rank #2.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>