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Diageo Expects Tougher Currency Translations in FY 2016

Zacks Equity Research

Diageo plc DEO recently revealed that it expects tougher currency translations in the rest of fiscal 2016.

In a trading commentary ahead of the Annual General Meeting, the leading U.K.-based brewer revealed that it started fiscal 2016 on a strong note and performance is in line with expectations. The company has also delivered positive mix, though higher prices offset the positive results in the year.

However, the maker of Johnnie Walker whisky and Smirnoff vodka fears that currency movements would negatively affect its operating profit by £150 million ($230.5 million) in the year ending Jun 30, 2016, compared with fiscal 2015.

The company expects to deliver mid-single digit organic top-line growth and operating margin expansion of 100 basis points over three years driven by productivity gains.

Diageo is expanding fast into the emerging markets. The company acquired stake in United Spirits Limited in 2014, a leading Indian spirit company. Moreover, during fiscal 2015, the company gained full control of the tequila brand, Don Julio, to boost its presence in the premium tequila category.

Currently, Diageo carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Castle Brands Inc. ROX carrying a Zacks Rank #2 (Buy). A couple of consumer staples stocks worth considering are Primo Water Corporation PRMW and Cott Corporation COT. While Primo Water sports a Zacks Rank #1 (Strong Buy), Cott Corporation carries a Zacks Rank #2.

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DIAGEO PLC-ADR (DEO): Free Stock Analysis Report
 
COTT CORP QUE (COT): Free Stock Analysis Report
 
PRIMO WATER CP (PRMW): Free Stock Analysis Report
 
CASTLE BRANDS (ROX): Free Stock Analysis Report
 
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