LONDON, March 5, 2026, 09:20 GMT
- RBC is sticking to its Buy/Outperform rating on Diageo, holding the 2,000p target. The bank says the latest sell-off looks like a misread.
- Diageo slashed its fiscal 2026 organic sales forecast and cut the interim dividend by 50% last week, moves coming as Dave Lewis steps in as the new CEO.
- The stock finished Wednesday at £15.20, down about one-third from its 52-week peak.
RBC Capital Markets stuck with its Buy/Outperform rating on Diageo plc (DGE.L) Wednesday, maintaining a 2,000 pence price target. The brokerage said the stock’s recent drop looks overdone. According to RBC, investors reacted to new chief executive Dave Lewis’s move to reset expectations—more margin investment in North America, a dividend cut—rather than evidence of any fresh trading issues. The analysts highlighted internal inefficiency, with about 65% of orders processed manually and some 80% of sales staff time devoted to order management, as areas ripe for both sales growth and cost savings.
The call comes as Diageo works to regain its footing following a rough update back in February. On Feb. 25, the maker of Johnnie Walker and Guinness lowered its target for organic sales in fiscal 2026—a metric that excludes impacts from currency and acquisitions—forecasting a 2% to 3% decline, and slashed its interim dividend in half to 20 cents per share. The payout ratio is headed lower as well. CEO Lewis pointed to consumer spending constraints as “by far and away” the company’s toughest issue. Dan Coatsworth at AJ Bell didn’t mince words, labeling the results “awful” and the turnaround ahead a “massive” task. For Goodbody’s Fintan Ryan, this was only “just the trailer”—the main story is yet to come. Reuters
The question now: Can Lewis drive up North American volume while hanging onto margins? And will the renewed focus on mainstream brands translate into real orders instead of just presentation slides? Investors are in no mood for yet another reset.
Diageo dropped 2.88% to 15.20 pounds on Wednesday, while the FTSE 100 advanced 0.80%. Shares sat roughly 31.7% under the 52-week peak of 22.26 pounds, which was hit on March 5, 2025.
It’s been a rough ride across the broader spirits sector. Brown-Forman in the U.S. managed to top quarterly expectations Wednesday, yet the company warned conditions remain challenging—consumer spending is tightening, and there’s a noticeable drift toward non-alcoholic choices. Reuters highlighted Diageo’s comments on wallet pressure, now the group’s main stumbling block.
Campari posted organic revenue gains for 2025 in Europe, forecasting stronger profitability later this year. CEO Simon Hunt told investors he sees “continued pace of underlying topline growth and improvement in profitability” heading into 2026. Reuters
Diageo’s investor calendar shows its Q3 fiscal 2026 trading update lands May 6, while the UK ex-dividend date for the interim payout is April 16.
The risk is clear: Should U.S. demand remain sluggish, and if price cuts or ramped-up marketing don’t boost sales, margins may shrink before any gains materialize. With consumers pulling back and preferences changing, that payoff could be delayed — leaving the stock stuck in place.
