RBC Capital upgrades Diageo to 'outperform' amid takeover rumours

15th Jun 2015 09:25

RBC Capital Markets lifted its forecast for British drinks business Diageo from 'underperform' to 'outperform' and raised the target price to 2,100p from 1,700p.RBC noted last week's rumours that private equity firm 3G Capital was eyeing up the business and said it doesn't matter whether the stories are true. " What does is that it's credible and should prompt management introspection," said RBC.Analyst James Edwardes Jones in a note to clients that the rumours could fuel urgency towards dealing with headwinds such as excessive trade loading, poor pricing and weak cast conversion."With 3G metaphorically looking over its shoulder, we think the probability of a significant increase in planned cost savings and margin is significant," he said.RBC noted any significant change to assumed global GDP growth will impact share price and financial performance.It also said the United States remains important to Diageo and if consumer confidence in that country falls it could jeopardise share price performance.Share in Diageo were down 0.63% at 1,884.5p on Monday.