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Topic: Growth Stocks

DIAGEO PLC ADRs $107

DIAGEO PLC ADRs $107 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 630.0 million; Market cap: $67.4 billion; Price-to-sales ratio: 4.4; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.diageo.com) is the world’s largest premium alcoholic beverage company. Its major brands include Guinness stout, Smirnoff vodka, Johnnie Walker whisky and Captain Morgan rum.

Diageo recently sold its wine operations in Australia and its Jamaican brewing operations. That freed up cash it can use to expand its main spirits businesses. They include its upcoming deal to buy Australian whisky maker Starward.

In the six months ended December 31, 2015, Diageo’s sales fell 5.0% to 5.6 billion pounds from 5.9 billion a year earlier (1 pound=$1.85 Canadian). If you exclude the brands that Diageo recently sold and the negative impact of currency exchange rates, sales gained 1.8%. Earnings per ADR fell 4.7%, to 2.05 pounds from 2.15. (Each American Depositary Receipt represents four common shares.)

The stock trades at a 21.3 times the $5.03 per ADR that Diageo will probably earn in the fiscal year ending June 30, 2016. The $3.46 dividend yields 3.2%.

Diageo is a hold.

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