Diageo's shares rebound with a 3.6% rise in early trading, analysts upgrade ratings

Shares in Diageo, the powerhouse behind Guinness, Baileys and Johnnie Walker, are making a recovery after hitting a historic low last month. The London-based group, which also has a listing on the New York Stock Exchange, saw its shares climb to 2,581p in early trading today, marking an increase of 3.6 per cent.

This is a significant rise from the 2,341p at which Diageo's shares were trading on 4 December and the all-time low of 2,306p on 6 November. However, despite the recent uptick, Diageo's shares are still down from the 2,819p they were valued at on 2 January and the 3,027p peak in 2024, as reported by City AM.

The recent surge in Diageo's share price follows an upgrade by UBS analysts, who raised the FTSE 100 member two levels in a note published on Wednesday, 11 December. In their report, UBS analysts noted that Diageo's US business is gaining traction after weathering the impact of a post-pandemic shift away from pricier spirits consumed at home.

Shares in Diageo's US listing on the New York Stock Exchange have increased nearly five per cent in premarket trading to $131.5, up from yesterday's close of $126.7. As a result of this positive momentum, UBS has upgraded its rating for Diageo from sell to buy.

This follows a similar move by US group Jefferies, which also elevated Diageo to a buy rating earlier this month. Despite these developments, Diageo maintains that the 'global environment remains challenging.'

In a statement released to the London Stock Exchange prior to its annual general meeting set for September, Diageo's chief executive Debra Crew remarked: "Our expectations are unchanged from when we reported our fiscal 24 preliminary results on 30 July, 2024."

She added, "The global environment remains challenging for both our industry and Diageo."

Crew also noted, "While consumers continue to be cautious in this environment, we are focused on strengthening the resilience of our business through operational excellence, productivity and strategic investments to win quality market share."

She highlighted progress in strategic areas, stating, "We have made good progress on our strategic initiatives, including our US route-to-market enhancements, and in Nigeria we are progressing well towards completion of the agreement to restructure our business model there."

Crew expressed confidence in the industry's prospects: "I believe that the fundamentals for global TBA, and particularly the spirits industry, remain strong and am confident that when the consumer environment improves, growth will return and the actions we are taking will position us well to outperform the market."