Broker snap: Diageo positioning for 'significant' growth, says Numis

20th Nov 2013 11:06

Numis Securities has held on to its 'add' rating for Diageo following the company's Investor Day this week at which it reiterated its commitment to delivering on medium-term growth guidance.The drinks company maintained the forecasts first issued in August 2011 for: average annual organic top-line growth of 6%; an operating margin improvement of 200 basis points; and double-digit growth in core earnings per share (EPS) in the three years to June 2014.However, Numis admitted that while the firm showed its confidence in hitting these targets, "the market may be disappointed that no new explicit targets have been put in place".The stock was down 1.26% at 2,003p on Wednesday morning.The broker said that the Investor Day was an opportunity for new Chief Executive Ivan Menezes to "establish his ambitions" for the business. Its impression was that it will be "more of the same" under his leadership, but with a "renewed energy and determination".It said that emerging markets represent a major opportunity for Diageo despite the slowdown now being experienced in Brazil, Nigeria, China and other markets. "We believe that Diageo has the scale and capability to exploit the opportunity," the broker said."In our view, Diageo is positioning itself to deliver significant EPS growth in the medium- to longer-term as it continues to enhance the strength of its brands via effective marketing and improved local routes to market. "Uncertainty about exchange rate movements and slowing emerging markets are putting pressure on growth forecasts in the near-term which we believe is creating an opportunity for investors with longer-term investment horizons."The broker maintained a target price of 2,200p.BC