British alcoholic beverage company Diageo (NYSE:DEO) plunged in pre-market trading after the maker of Johnnie Walker whisky warned of a drop in its operating profits. This is due to macroeconomic challenges in the Latin American region that are leading to lower alcohol consumption or consumers switching to lower priced options.
The company stated in its press release that these “impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment.” Diageo added that the Latin American and Caribbean (LAC) region comprised around 11% of the company’s sales in FY23. The company anticipates that its organic net sales for this region are likely to decline by more than 20% year-over-year in the first half of FY24.
Diageo remained confident about its growth over the medium term and added that it continues to “believe in the fundamental strength” of the business and expects “to deliver organic net sales growth between 5 and 7% over the medium term.”
What is the Target Price for DEO?
Analysts remained cautiously optimistic about DEO stock, with a Moderate Buy consensus rating based on one Buy and one Hold. The average DEO price target of $163.50 implies an upside potential of 2.2% at current levels.
