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Solid Organic Growth Aid Diageo's (DEO) Fiscal 2018 Earnings
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Diageo plc (DEO - Free Report) reported preliminary fiscal 2018 results, ending Jun 30, 2018, wherein earnings gained 9.3% (in local currency) year over year. This was backed by a higher organic operating profit and lower finance charges, offset by higher tax expenses and unfavorable currency.
While Diageo’s stock declined nearly 2% yesterday, shares of this Zacks Rank #5 (Strong Sell) company have rallied 13.7% in the past year, outperforming the industry’s decline of 3.7%. Clearly, this alcohol behemoth is riding on its focus on innovations, achieving growth through buyouts and penetration in emerging markets.
Fiscal 2018 Highlights
On a reported basis, net sales and operating profits moved up 0.9% and 3.7%, respectively, owing to organic growth, partly negated by unfavorable exchange rates.
Organic sales increased 5%, gaining from broad-based growth across all regions and categories, except for vodka. This marked the second year where the company delivered on its organic sales guidance. Sales also benefited from organic volume growth of 2.5% as well as a positive price mix of 2.5%. Volumes improved primarily due to IMFL whiskies, scotch and gin. While pricing remained stable, mix gained from stronger growth of IMFL whiskies in Diageo India.
The progress in top line and productivity program aided organic operating profit, which grew 7.6%. Further, organic operating margin expanded 78 basis points (bps), driven by increased productivity savings in overheads and lower related costs.
Financials
The company continues to generate solid cash flows, which was in line with the last year. It marked the fourth straight year of strong cash performance. Furthermore, the company reported another year of strong free cash flows.
Backed by the strong cash and operating performance, Diageo remains committed to its disciplined approach to capital allocation, primarily to enhance shareholder value. In sync with that, the company returned £1.5 billion to shareholders in fiscal 2018 through share repurchases. It also authorized a new share buyback plan for fiscal 2019, worth up to £2 billion. The company also announced a 5% increase in final dividend.
Other Updates
The company acquired the fastest-growing premium tequila brand in the U.S., Casamigos. Along with the existing Don Julio brand, the buyout is expected to boost Diageo’s market share in the tequila category. The deal is worth $1 billion, where the company is going to pay $700 million initially and $300 million after looking into the performance of the brand over the next decade.
The company also launched a partial tender offer for Shui Jing Fang, which is likely to expand the company’s shareholding from approximately 40% up to 60%.
Outlook
Moving ahead, Diageo expects synergies from its productivity initiatives to persist in fiscal 2019. It continues to expect organic net sales to improve in the mid-single digit in fiscal 2019. Based on current rates, the company expects currency headwinds to significantly impact both net sales and operating profit.
Driven by its productivity program, the company expects to deliver on its targeted operating margin expansion of 175 bps for the three years, ending Jun 30, 2019.
Boston Beer has long-term earnings growth rate of 9.5%. Moreover, the stock has increased 39.1% in the last three months.
Darling Ingredients has rallied 18% in the last three months. The company delivered an average positive earnings surprise of 106.1% in the last four quarters.
Turning Point has delivered positive earnings surprise of 16.7% in the last reported quarter. Moreover, the stock has rallied 55.5% in the last three months.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Solid Organic Growth Aid Diageo's (DEO) Fiscal 2018 Earnings
Diageo plc (DEO - Free Report) reported preliminary fiscal 2018 results, ending Jun 30, 2018, wherein earnings gained 9.3% (in local currency) year over year. This was backed by a higher organic operating profit and lower finance charges, offset by higher tax expenses and unfavorable currency.
While Diageo’s stock declined nearly 2% yesterday, shares of this Zacks Rank #5 (Strong Sell) company have rallied 13.7% in the past year, outperforming the industry’s decline of 3.7%. Clearly, this alcohol behemoth is riding on its focus on innovations, achieving growth through buyouts and penetration in emerging markets.
Fiscal 2018 Highlights
On a reported basis, net sales and operating profits moved up 0.9% and 3.7%, respectively, owing to organic growth, partly negated by unfavorable exchange rates.
Diageo plc Price and Consensus
Diageo plc Price and Consensus | Diageo plc Quote
Organic sales increased 5%, gaining from broad-based growth across all regions and categories, except for vodka. This marked the second year where the company delivered on its organic sales guidance. Sales also benefited from organic volume growth of 2.5% as well as a positive price mix of 2.5%. Volumes improved primarily due to IMFL whiskies, scotch and gin. While pricing remained stable, mix gained from stronger growth of IMFL whiskies in Diageo India.
The progress in top line and productivity program aided organic operating profit, which grew 7.6%. Further, organic operating margin expanded 78 basis points (bps), driven by increased productivity savings in overheads and lower related costs.
Financials
The company continues to generate solid cash flows, which was in line with the last year. It marked the fourth straight year of strong cash performance. Furthermore, the company reported another year of strong free cash flows.
Backed by the strong cash and operating performance, Diageo remains committed to its disciplined approach to capital allocation, primarily to enhance shareholder value. In sync with that, the company returned £1.5 billion to shareholders in fiscal 2018 through share repurchases. It also authorized a new share buyback plan for fiscal 2019, worth up to £2 billion. The company also announced a 5% increase in final dividend.
Other Updates
The company acquired the fastest-growing premium tequila brand in the U.S., Casamigos. Along with the existing Don Julio brand, the buyout is expected to boost Diageo’s market share in the tequila category. The deal is worth $1 billion, where the company is going to pay $700 million initially and $300 million after looking into the performance of the brand over the next decade.
The company also launched a partial tender offer for Shui Jing Fang, which is likely to expand the company’s shareholding from approximately 40% up to 60%.
Outlook
Moving ahead, Diageo expects synergies from its productivity initiatives to persist in fiscal 2019. It continues to expect organic net sales to improve in the mid-single digit in fiscal 2019. Based on current rates, the company expects currency headwinds to significantly impact both net sales and operating profit.
Driven by its productivity program, the company expects to deliver on its targeted operating margin expansion of 175 bps for the three years, ending Jun 30, 2019.
Looking for Solid Stocks, Check These
Some better-ranked stocks in the consumer staples sector are The Boston Beer Company Inc. (SAM - Free Report) , Darling Ingredients Inc. (DAR - Free Report) and Turning Point Brands, Inc. (TPB - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boston Beer has long-term earnings growth rate of 9.5%. Moreover, the stock has increased 39.1% in the last three months.
Darling Ingredients has rallied 18% in the last three months. The company delivered an average positive earnings surprise of 106.1% in the last four quarters.
Turning Point has delivered positive earnings surprise of 16.7% in the last reported quarter. Moreover, the stock has rallied 55.5% in the last three months.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>