Broker snap: Diageo building momentum

14th Feb 2011 12:06

Charles Stanley stays with its 'accumulate' rating on beverage group Diageo and suggests that investors should use the recent weakness in the share price - following the results - as a buying opportunity.Although the results came in at the bottom range of expectations, the broker notes that Diageo's performance varied materially by region, with an improving trend in the US and growth in emerging markets, being partly offset by a weakness in Europe. Additionally, the financial performance of the group, whose brands include Guinness, Smirnoff vodka and Johnnie Walker whisky, was also held back by a 10% increase in marketing expenditure.Earnings per share estimates for 2011 and 2012 are reduced by 2% to 78.8p and 86p, respectively, "reflecting the slightly slower than expected progress made in the first half of the year," says analyst Sam Hart. However, Hart notes that this is not a beginning of a sustained period of forecast downgrades.Diageo's "unrivalled portfolio of premium brands and distribution network leaves it very well positioned to benefit from the ongoing premiumisation trend in the global beverages industry." Charles Stanley's 12 month share price range is between 1,025p and 1,258p.