Diageo Plc DEO is scheduled to release interim results for the first half of fiscal 2025 on Feb. 4. The company has been witnessing difficulties in the Latin America and Caribbean (LAC), and North America regions, which negatively impacted the company’s results in fiscal 2024.

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However, DEO is experiencing solid business momentum, strong consumer demand and market share gains, which have been boosting its performance. DEO is anticipated to have retained the strength in its business on constant premiumization efforts and favorable industry trends, particularly in the spirits category.

Key Factors to Note Ahead of DEO’s 1H25 Earnings

DEO has been facing troubles in its key markets, including LAC and North America. The gloomy outlook for these segments suggests soft results for the company in the first half of fiscal 2025.

Notably, the alcoholic beverage company, which reports on a half-yearly basis, has been experiencing significant challenges in the LAC region, which accounts for 10% of its net sales. The company's performance in LAC has weakened significantly due to rapidly changing consumer sentiment in fiscal 2024.

Despite the ongoing challenges in Brazil, Central America, the Caribbean and parts of South LAC, there was some stabilization in demand in the second half of fiscal 2024, resulting in market share gains. However, Mexico continues to experience a highly competitive environment and consumer downtrading, contributing to persistent difficulties in the region. Although Diageo has been actively addressing these issues, the company has been cautious about the outlook for LAC, expecting ongoing macroeconomic challenges to continue affecting performance in the to-be-reported period.

Additionally, Diageo’s North America performance has been impacted by the U.S. spirits market due to a cautious consumer environment, adjustments in the retailer inventory and the comparison with inventory replenishment from the previous year. The persistence of the troubles in the U.S. spirits category is expected to have impacted volumes and sales for the North America business in the first half of fiscal 2025.

Diageo has also been facing significant inflationary pressures due to rising costs for commodities such as agave, increased energy expenses and ongoing supply-chain disruptions. While the company has implemented productivity savings, supply efficiencies and pricing adjustments to mitigate some of these challenges, it has been grappling with substantial cost increases in materials like glass, paper, metal and transportation.

Diageo’s Price Performance & Valuation

DEO shares have exhibited a downtrend, declining as much as 19.8% in the past year. The stock has outperformed the broader industry’s decline of 24.9%. However, the Zacks Rank #4 (Sell) stock has underperformed the Consumer Staples sector’s decline of 3% and the S&P 500 index’s growth of 23.8% in the same period.

DEO’s One-Year Stock Price Performance

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From the valuation standpoint, DEO trades at a forward 12-month P/E multiple of 17.55X, exceeding the industry average of 14.25X but underperforming the S&P 500’s average of 22.46X. Diageo’s valuation appears quite pricey compared with the industry at current levels.

Looking for Lucrative Picks? Check These

Here are some companies you may want to consider this earnings season.

US Foods USFD is likely to register top and bottom-line growth when it reports fourth-quarter 2024 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $9.5 billion, which suggests growth of 6% from that reported in the prior-year quarter. USFD currently has a Zacks Rank #2 (Buy) and an Earnings ESP of +2.68%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for US Foods’ quarterly earnings has been unchanged in the past 30 days at 80 cents per share. The consensus estimate suggests 25% earnings growth from the year-ago quarter’s reported number. USFD has delivered a negative earnings surprise of 0.4%, on average, in the trailing four quarters.

Coca-Cola KO is expected to register bottom-line growth when it reports fourth-quarter 2024 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $10.7 billion, which suggests a decline of 1.5% from that reported in the prior-year quarter. The company currently has a Zacks Rank of 3 (Hold) and an Earnings ESP of +0.35%.

The Zacks Consensus Estimate for Coca-Cola’s quarterly earnings has moved down by a penny in the past 30 days to 51 cents per share. The consensus estimate suggests 4.1% earnings growth from the year-ago quarter’s reported number. KO has delivered an earnings beat of 3.9%, on average, in the trailing four quarters.

General Mills GIS currently has a Zacks Rank #3 and an Earnings ESP of +7.77%. GIS is anticipated to register top and bottom-line declines when it reports third-quarter fiscal 2025 results. The Zacks Consensus Estimate for General Mills’ quarterly revenues is pegged at $5.1 billion, indicating a decline of 0.8% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for General Mills’ bottom line has moved up 4% in the past seven days to $1.03 per share. The consensus estimate for GIS suggests a decline of 12% from the year-ago quarter’s reported figure. GIS has delivered an earnings beat of 7.8%, on average, in the trailing four quarters.

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