Diageo: This Turnaround Story Is Getting Harder To Ignore

Diageo is reiterated as a Buy, supported by ongoing cost savings, a solid balance sheet, and a promising turnaround under the new CEO. DEO's new cost-cutting plan targets $1 billion in cost savings over two years, with 40% of operational and 25% of supply chain savings expected in FY27. FY27 guidance calls for broadly flat organic net sales, with North America down mid-single digits, and FCF temporarily dipping to ~$2 billion due to restructuring costs. Valuation remains conservative, with intrinsic value estimated above current levels, reflecting confidence in long-term risk-reward despite near-term headwinds.