In recent months, publicly traded wine and spirits companies in the U.S. have delivered shot-glass-sized warnings about the health of the industry and the prospects for recovery.
On Thursday, Diageo
Comparing Diageo -- whose brands include Smirnoff vodka, Captain Morgan rum, and Johnnie Walker whiskey -- to its U.S-based peers can be tricky, and not just because Diageo dwarfs them in market capitalization and geographic reach. The U.S. companies report quarterly. London-based Diageo reports every six months. Its preliminary fiscal-year report, issued Thursday, covers all 12 months of its fiscal year.
And while U.S. companies bemoaned the impact of a strengthening U.S. dollar on their quarterly results, Diageo rode the weakening of the British pound to a 15% gain in reported sales year over year. Without the foreign-exchange benefit and the gain from some new brands, Diageo's fiscal-year revenue would have been flat.
The company announced two rounds of cost-cutting in February and July, which should significantly reduce expenses going forward.
Performance versus expectations
Major U.S.-traded wine and spirits companies showed a consistent trend in their most recent quarterly reports. Their earnings per share beat analysts' estimates, but fell below -- sometimes well below -- year-ago periods. The group includes Constellation Brands
Analysts had been optimistic about Diageo. Between early May and Thursday, four investment-banking firms raised their ratings.
However, Diageo's stock skidded Thursday after it unveiled its results, even though the company's profit of 1.62 billion pounds ($2.63 billion) beat last year's 1.52 billion pounds, and edged the consensus forecast of analysts polled by Bloomberg News.
I didn't see any analysts immediately running for cover after Diageo's announcement. Maybe they appreciate a sobering assessment by a wine and spirits company that still appears to be the best-suited among peers to ride out the recession. But if spirits aren't quite your tipple, you might be interested in the increased prospects at big brewers such as Molson Coors
Two fingers of further Foolishness:
Diageo is a Motley Fool Income Investor selection. Fortune Brands is a Stock Advisor recommendation. SABMiller is a Global Gains selection. Try any of our Foolish newsletter services free for 30 days.
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