Broker snap: Canaccord cuts Diageo target after H1 miss

30th Jan 2014 10:28

Canaccord Genuity has cut its target price for drinks group Diageo from 1,900p to 1,835p and kept a 'hold' rating, recommending investors to take a cautious view on near-term forecasts after a disappointing first-half report.The company, famous for its Johnnie Walker and Guinness brands, reported a 3% fall in volumes in the first half with sales growth limited to just 1.8%.Canaccord said that the second-quarter performance was worse than expected, with trends in Latin America and Asia deteriorating more than anticipated.In particular, the broker highlighted that Asian sales fell by 6% in the first half as a whole despite 0.6% growth in the first quarter, due to declining sales in China. "Investors value Diageo for its scale, brand portfolio and high quality financial management," said analysts Eddy Hargreaves and Alicia Forry."While those with a long term horizon may be sanguine about the organic slowdown, we think others should be cautious about F14 and F15 earnings as delivery now appears more dependent on continued and accelerating margin performance."They said that Diageo is "not immune" to broader macroeconomic pressures, especially at present in many key emerging markets.Diageo trades at 16.3 times estimated earnings this year, in line with the wider food and beverage sector, the analysts said.The stock was down 6.91% at 1,778p by 10:49 on Thursday.BC