LONDON, March 5, 2026, 09:20 GMT
- RBC kept a Buy/Outperform call on Diageo with a 2,000p target, arguing the recent sell-off has been misread
- Diageo last week cut its fiscal 2026 organic sales outlook and halved its interim dividend under new CEO Dave Lewis
- Shares closed at £15.20 on Wednesday, roughly a third below their 52-week high
RBC Capital Markets kept a Buy/Outperform stance on Diageo plc (DGE.L) on Wednesday and held a 2,000 pence price target, arguing the spirits maker’s recent slide has been overdone. The broker said investors balked at new chief executive Dave Lewis resetting expectations — including more margin investment in North America and a dividend cut — rather than any new hole in trading. RBC pointed to internal frictions, including an estimated 65% of orders handled manually and about 80% of sales staff time spent managing orders, as scope for sales uplift and cost cuts. 1
The call lands as Diageo tries to steady itself after a bruising February update. On Feb. 25, the Johnnie Walker and Guinness maker cut its fiscal 2026 organic sales outlook — a measure that strips out currency swings and acquisitions — to a 2%-3% fall and halved its interim dividend to 20 cents a share, while setting a lower payout ratio going forward. Lewis said pressure on consumer wallets was “by far and away” the biggest challenge; AJ Bell’s Dan Coatsworth called the results “awful” and said the “repair job is massive,” while Goodbody analyst Fintan Ryan described the announcement as “just the trailer” ahead of a fuller strategy. 2
What matters now is whether Lewis can rebuild volume in North America without giving away too much margin, and whether the push back toward more mainstream brands actually shows up in orders rather than slides. Investors have little patience for another reset.
Diageo shares fell 2.88% to 15.20 pounds on Wednesday, underperforming London’s FTSE 100, which rose 0.80%. The stock was about 31.7% below its 52-week high of 22.26 pounds set on March 5, 2025. 3
The wider spirits tape has been choppy. U.S. peer Brown-Forman beat quarterly estimates on Wednesday but still flagged a tough operating backdrop, as consumers pull back and some shift toward non-alcoholic options; Reuters noted Diageo had recently pointed to wallet pressure as its biggest hurdle. 4
In Europe, Campari reported organic revenue growth for 2025 and said it expects an improvement in profitability this year. Chief executive Simon Hunt said the group expects “continued pace of underlying topline growth and improvement in profitability” in 2026. 5
For Diageo, the next hard checkpoint is its scheduled Q3 fiscal 2026 trading update on May 6, with the interim dividend’s UK ex-dividend date set for April 16, according to its investor calendar. 6
But the downside case is plain enough. If U.S. demand stays soft and price cuts or extra spending fail to move volumes, margins could take a hit before any payoff arrives. A slower consumer and shifting drinking habits would stretch the timeline — and keep the stock pinned.
