Diageo (DGELN; A3/A-/A-) trading update for AGM
It's given a trading update which left FY25 (12m to June) guidance unch and it continues to tie it to macro; "when the consumer environment improves, growth will return and the actions we are taking will position us well to outperform the market.” For comparison Campari has " the Group is expected to continue outperforming the industry" - i.e. no contingencies and 'continuing' since it has been already. Equities (+4%) and sector (+4-6%) are bid on it not explicitly giving bad news and positive colour on progress around 'strategic investments'.
As reminder Diageo's FY25 outlook is "when the consumer environment improves, organic net sales growth will return" and negative EBIT margin pressure to remain in FY25 (fell -121bps in FY24). Re. the headline growth, consensus is at +2% but it has stayed pessimistic today; "
the global environment remains challenging for both our industry and Diageo".
Campari 27s mids are at B+175/Z+138/3.6% - we reiterate we see value on it (hearing trading in smalls). It looks to be a unrated discount and not helped by sector underperformance (which it has avoided to some extent). If it were rated BBB/BBB- we see FV around -50bps through current mids but please note it is not at historical wides on RV - i.e. market doesn't recognise it as such. No leverage target but current levels are elevated vs. historical after M&A. We don't expect supply in near future.
Presser here