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
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