Analysis - Diageo EPS set to beat Pernod Ricard in fiscal-2013
Diageo and Pernod Ricard will swap places in the race for EPS growth
Although Kepler Cheuvreux reduced its expectations for Diageo's earnings-per-share in the 12 months to the end of June, analyst Laetitia Delaye said earlier this week that the UK-headquartered firm is set fair to beat Pernod's earnings this year. In fiscal-2014, however, Pernod is expected to perform better than Diageo.
Delaye said that Kepler Cheuvreux has cut its EPS growth forecasts for Diageo to 8.4% for both of the two fiscal years from the previous estimate of 10%.
The analyst blamed “ongoing softness” for Diageo in Asia, Brazil and Nigeria in the three months to the end of June. Earlier this year, Diageo flagged "consumer weakness" in Brazil and Nigeria in its third quarter.
Asia should deliver a 1.5% lift in like-for-like sales for fiscal-2013, down from Kepler's 4.5% prediction previously.
Also factored into the cut is “a lower contribution from acquisitions - mainly Shui Jing Fang in China and Ypioca in Brazil”, and “the strategic decision to sustain A&P and distribution investments, despite slower-than-expected top line”.
“We still expect Diageo to outpace Pernod on organic sales and EBIT in 2013 and 2014,” said Delaye. “We now see Diageo delivering like-for-like sales (growth) of 4.5% in 2013 (5.0% previously) and 5.9% in 2014 (6.3% previously) versus 3.9% and 4.7%, respectively, for Pernod Ricard.”
Diageo's EBIT should grow by around 7.5% in fiscal-2013 and by 8.0% in fiscal-2014, versus 6.0% and 6.9%, respectively, for Pernod.
“On EPS. though,” Delaye noted, “while we expect Diageo to have substantially outpaced Pernod Ricard in 2013 (+8.4% versus +2.7%), we expect Pernod Ricard to regain the lead in 2014 (+11.8% vs +8.4%), due to favourable financial cost leverage.”
The two companies are set to release results for the 12 months to the end of June around the end of August.
With the end of the year looming, just-drinks is running a series of 'Top Tens of the Year' in the run-up to Christmas. Here are the ten most read news stories on just-drinks in 2013....
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