Diageo Earnings: Tariffs Loom, but Beverage Maker Can Weather the Storm

We maintain our GBX 2,590 fair value estimate for wide-moat Diageo after the firm reported its results for first-half fiscal 2025. Revenue increased ahead of our estimates. However, EPS fell short of our model due to lower-than-expected profitability and a hit from the firm’s noncontrolling stake in Moët Hennessy. Weak consumer confidence and continued headwinds in key markets make the timing of a recovery in the spirits sector uncertain. With this, management removed its medium-term organic revenue growth guidance and anticipates further margin deterioration in the second half of fiscal 2025. We view this as appropriate, but continue to believe Diageo is well positioned to capitalize on long-term secular drivers when the environment turns. While we have tempered our expectations for fiscal 2025, our long-term estimates remain unchanged. Shares fell around 2% following the release, leaving the stock in 4-star territory.