Will US Spirits Volume Growth Boost Diageo’s Year Ended June 2016 Results?

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Diageo

Diageo (NYSE:DEO) is expected to announce its second half and year ended June 2016 results on July 28th.

Diageo FY 2016 Pre Earnings

Diageo FY 2016 Company Guidance

Key Trends That May Affect The Quarter:

1) Improvement In The US Segment

  • Shipment growth in US spirits is expected for the second half.
  • The company’s ‘activation army’ marketing campaign, directed at the bars and restaurants segment, seems to have had an impact.
  • Recovery in this segment was seen in the quarterly growth rates in North America.
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2) Impact Of The Brexit

  • The Sterling has fallen considerably in the aftermath of the Brexit.
  • Since a majority of Diageo’s revenues, almost 90%, come from regions outside of Britain, a weaker pound is bound to benefit its top line.
  • Analysts at Credit Suisse stated that such a scenario of a weaker sterling could result in a 9% to 17% rise to the company’s earnings per share.

USD-GBP

3) Sustained Performance In Africa

  • An emerging and thirsty middle class has made Africa one of the most lucrative markets for the alcoholic beverage industry.
  • Africa’s TBA (Total Beverage Alcohol) consumption per head is currently below a quarter of other regions across the world, besides India.
  • The TBA volume is forecast to increase by ~25% over the next five years.

Have more questions on Diageo? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Diageo.

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