Nomura upgrades Diageo to 'buy'

23rd Jun 2015 09:42

Nomura upgraded Diageo to 'buy' from 'neutral' and raised the target price to 2,180p from 1,930p."Following recent meetings with the company, we are more confident that the 'bad news flow' for the company is abating and that a recovery in growth should become visible in full-year 2016," said Nomura.The Japanese bank said that with an improving outlook, it has fewer concerns about a possible dividend disappointment with full-year results at the end of July."In addition, with M&A being deemphasised, we see scope for possible buybacks to start during full-year 2016," it said.The bank said it continues to see a recovery story for the global spirits industry. For Diageo, Asia Pacific appears to be a bit stronger in the fourth quarter, it said. In addition, an improving US industry environment could start to improve performance into 2016, although comps remain tough for the first half."We remain sceptical about recent press reports of a bid for the company by 3G, but we do think this news flow could mark a sea change in share price performance after two soft years," added Nomura.At 09:48, Diageo shares were up 1.9% at 1,942.50p.