Jefferies lowers Diageo to 'hold' following banner year

Jefferies said it now sees a "more normalised outlook for growth", adding that it was becoming harder to identify the catalysts for over-delivery.

"DGE remains a well-run, diversified company that operates in a favourable industry, however, we move to 'hold' given less conviction on the upside to street expectations with the shares now fairly valued," said Jefferies, which issued the group with a 3,600.0p target price.

While Jefferies said Diageo had "stepped up the quality, pace and execution around innovation", as evidenced through first-mover advantage on pink gin and lower ABV vodka, the analysts deep dive on the group's banner year of innovation made them pause for thought until the next uplift from the innovation pipeline.

The analysts also said they expect steady margin progression given a continued pipeline of efficiency initiatives as the company's track record on cost-cutting was now "firmly proven".

"However, we struggle to see material upside after the strong F17-19 period (c.200bps) as well as the commitment, rightly, to continue to invest behind future growth to drive long term sustainability."