Broker snap: Nomura cuts Diageo target but keeps 'buy' rating

26th Jun 2013 10:27

Nomura has trimmed its target price for beverages group Diageo from 2,400p to 2,250p ahead of its results next month, but has kept its 'buy' rating for the stock, saying that the Guinness maker has strong defensive attractions in uncertain markets."With its wide portfolio of emerging markets (none accounting for over 4.0% of group earnings before interest and tax) and its large exposure to US (c35%), we see some strong defensive characteristics and believe that medium-term revenue guidance of 6.0% per annual can still be achieved, even with some emerging market slowdown," said analyst Ian Shackleton.Ahead of the full-year results on July 31st, the broker has made slight reductions to its earnings-per-share estimates for years ending June 2013 and June 2014 due to FX headwinds. Meanwhile, the cut in the target price is to "reflect our more conservative assumptions that the 6.0% revenue growth rate will not now accelerate in later years given some emerging markets softness".Meanwhile, the firm's appointment of a new Chief Executive Officer (Ivan Menezes), starting July 1st, is expected to put even greater focus on growth in emerging markets. Shackleton predicts that M&A will reflect this "with further moves likely in local spirits".He also highlighted that the potential for a "quantum leap", possibly with French group Moet-Hennessy.Diageo's share price was up 0.48% at 1,877.5p by 10:38 on Wednesday.