Citi says Diageo's earnings downgrade cycle is finally over
Published: 08:04 07 Aug 2026 EDT
Citi has told clients that Diageo PLC's (LSE:DGE) long run of earnings disappointments has come to an end, lifting its forecasts after the drinks group's capital markets day and Thursday's results.
The US bank raised its earnings per share estimates for the 2027 financial year by 3% and for 2028 by 6%.
Citi said the Johnnie Walker and Guinness owner had given an honest assessment of both the spirits market and the state of its own business.
The event also set out the steps management is taking to improve the group's growth trajectory.
There is no quick fix to returning the American business to growth, according to the broker.
But it argued that Diageo has correctly diagnosed its problems and is taking sensible action on what it can control.
That includes brand laddering, which involves offering products at different price points under the same brand, and price-pack architecture.
The company is also strengthening its ready-to-drink range.
Citi believes the combination of sensibly set organic sales growth guidance and a new $1 billion cost savings programme draws a line under the recent downgrade cycle.
A sustained re-rating of the shares will require evidence that management's actions are feeding through to sales, the bank cautioned.
That will take time. But with confidence in execution improving, and the stock trading on around 14 times Citi's calendar 2026 earnings forecast, the broker sees the risks skewed to the upside.
Stripping out the beer business, that multiple falls to roughly 12 times.
