Image Source: Zacks Investment Research <\/p>\n
From the valuation standpoint, DEO trades at a forward 12-month P\/E multiple of 13.84X, underperforming the industry average of 15.83X and the S&P 500’s average of 20.28X. Diageo’s valuation appears quite cheap compared with the industry at current levels. <\/p>\n
Image Source: Zacks Investment Research <\/p>\n Key Factors to Note <\/p>\n Diageo has been grappling with weak demand in the United States and China, leading to volume declines, an unfavorable sales mix, and continued top-line pressure. These trends are raising concerns over earnings growth and pushing out the timeline for a meaningful recovery. In North America, performance has been hurt by pressure on consumer disposable income, weighing on U.S. spirits demand, while in the Asia Pacific, the growing preference for Chinese white spirits has further impacted sales.<\/p>\n Diageo has revised its near-term outlook downward, reflecting continued demand weakness and macro uncertainty. The company predicted organic sales to decline 2-3%, reflecting further weakness in the United States, including the effects of Chinese white spirits. Additionally, operating profit growth is expected to remain muted, with a flat to low-single-digit increase, mainly driven by the updated net sales guidance and the tariff impacts. Earnings are expected to be impacted by lower operating profit and disposals, signaling limited near-term momentum.<\/p>\n Diageo has been facing sustained margin headwinds from an unfavorable shift in product mix, cost inflation and tariff impacts. Premium categories such as tequila have slowed, reducing the contribution of profitable brands. As consumers shift toward lower-priced alternatives, the mix benefit that historically supported the gross margin is fading, leading to weaker profitability despite relatively stable pricing in some regions.<\/p>\n Input cost inflation, logistics expenses and supply-chain inefficiencies continue to weigh on gross profit. Although operational efficiencies and cost-saving initiatives under the “Accelerate” program are helping offset some of these pressures, they are not fully mitigating the impacts of lower gross margins.\u00a0<\/p>\n Tariff-related uncertainties, particularly on imports into the United States, also pose incremental risks to cost structures. Even with mitigation strategies in place, tariffs are expected to create additional friction on the operating margin, limiting near-term earnings recovery and keeping profitability under pressure. <\/p>\n Stocks With the Favorable Combination <\/p>\n Here are a few companies, which according to our model, have the right combination of elements to beat on earnings this reporting cycle.<\/p>\n Primo Brands Corporation PRMB has an Earnings ESP of +16.51% and a Zacks Rank #2 (Buy) at present. PRMB is likely to register top-line growth when it releases second-quarter 2026 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $1.76 billion, which implies a rise of 1.8% from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.<\/p>\n The consensus estimate for Primo Brands’ quarterly earnings has declined a penny in the past 30 days to 34 cents per share, implying a drop of 5.6% from the year-ago quarter’s reported number. PRMB delivered an earnings surprise of 1.4%, on average, in the trailing four quarters.<\/p>\n Kraft Heinz Company KHC currently has an Earnings ESP of +0.82% and a Zacks Rank #2. The company is likely to register declines in the top and bottom lines when it reports second-quarter 2026 numbers. The consensus mark for revenues is pegged at $6.2 billion, which indicates a decrease of 3% from the figure reported in the year-ago quarter.\u00a0<\/p>\n The Zacks Consensus Estimate for KHC’s quarterly earnings per share of 53 cents implies a decline of 23.2% from the year-ago quarter’s actual. The consensus mark has been unchanged in the past 30 days. KHC has a trailing four-quarter earnings surprise of 10.2%, on average.<\/p>\n Monster Beverage MNST currently has an Earnings ESP of +2.61% and a Zacks Rank #3 (Hold). The company is expected to register growth in its top and bottom lines when it reports second-quarter 2026 results. The Zacks Consensus Estimate for MNST’s quarterly earnings was unchanged in the last 30 days at 59 cents per share, indicating 13.5% growth from the year-ago quarter’s reported number.<\/p>\n The consensus estimate for Monster Beverage’s quarterly revenues is pegged at $2.4 billion, implying a rise of 14.5% from the figure registered in the prior-year quarter. MNST reported a negative earnings surprise of 9.6%, on average, in the trailing four quarters. <\/p>\n Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report<\/a> <\/p>\n Diageo plc (DEO) : Free Stock Analysis Report<\/a> <\/p>\n Monster Beverage Corporation (MNST) : Free Stock Analysis Report<\/a> <\/p>\n Kraft Heinz Company (KHC) : Free Stock Analysis Report<\/a> <\/p>\n Primo Brands Corporation (PRMB) : Free Stock Analysis Report<\/a> <\/p>\n This article originally published on Zacks Investment Research (zacks.com).<\/a> <\/p>\n<\/a> Zacks Investment Research <\/p>\n