Diageo upgraded to 'neutral' by Credit Suisse, but fundamentals still poor

9th Jun 2015 13:24

Credit Suisse upgraded Diageo to 'neutral' from 'underperform'."With the shares having already gone below our target price (1,800p), and an increased speculative angle impacting the share price we raise our rating," it said, noting that fundamentals are still poor.Commenting on the weekend press reports that private equity firm 3G Capital was in the early stages of considering a bid for Diageo, Credit Suisse said: "Diageo is very exposed, confidence in management is low meaning, in our opinion, any bid would be well received by investors."For 3G, aside from cost savings, "the prize could be a higher multiple on the largest international spirits business in the world," said the bank.It added that Diageo's best defense would be to replicate 3G's strategy by instilling a zero based budgeting savings programme and disposing of non-spirits assets. Zero based budgeting is a method that involves justifying all expenses for each new period.At 15:00, Diageo shares were up 1% at 1,899.50p.