Holding Diageo shares? Here’s what to expect from tomorrow’s results

Diageo (LSE:DGE) shares have been on a downward slope for some time now, irking investors and testing the market’s patience. Tomorrow (25 February) the FTSE 100 drinks giant announces its results for the first half of the fiscal 2026 year.

As the company behind premium brands like Guinness, Smirnoff, and Johnnie Walker, the question is: are drinkers still happy to pay up for the good stuff?

What the market expects

The last year or two have been rough. Profit growth stalled as demand in key markets (US, China, and Latin America) faded, and the Latin America business has been dealing with an ‘inventory hangover’ after shipping too much stock during and after Covid.

Now, most City analysts expect Diageoâs earnings to fall again this year (after already dropping last year). Some forecasts are pointing to a nearâ30% earnings decline before a recovery in 2027.

Management has already warned that sales and profits will be weak in the first half and stronger in the second, so investors are braced for disappointment. Guidance was cut late last year, now only aiming for flat to slightly lower sales and 3%-5% profit growth for the full year.

Not exactly inspiring â but there are some upsides.

An undervalued dividend gem?

Although the share price fell heavily through 2024 and 2025, it has bounced back about 15% since the start of the year (still down over the past 12 months, though). With the shares having dropped so far, the valuation has come down a lot. Estimates now put its forward priceâtoâearnings (P/E) ratio at 15.5, compared with a 10âyear average in the lowâ20s.

Basically, the market is no longer treating it as an untouchable ‘premium luxury’ share — more a solid but challenged consumer business.

But when it comes to income, Diageo remains a solid payer. It distributed about 79p per share in dividends for the 2025 financial year, which, at a recent share price around Â£18, gives it a yield of roughly 4.5% — higher than its longârun average yield of just under 3%.

Still, risks abound. The most recent dividend payout was almost equal to earnings, so they could face a cut if profits keep sliding.

Macroâwise, there are also some concerns. With living costs up, consumers in Latin America and parts of Asia are opting for lower-cost alternatives. Meanwhile, the US spirits market has also cooled and China has been weak for white spirits.

All this adds to ongoing uncertainty around leadership and strategy, especially after management changes and lowered guidance.

So, is it still worth considering now?

Diageo is still a quality franchise. Its big name brands still command loyalty, and the longâterm habit of people drinking beer and spirits isnât going away tomorrow. However, what started as a little wobble for the alcohol giant is becoming a serious tremor.

If management can work through the inventory issues and revive growth, the lower valuation and high yield could be lucrative. On the flip side, if the turnaround drags on, investors might be stuck holding a slow-growth share with slashed dividends.

For patient investors who trust in the recovery, Diageo presents a strong income and value opportunty worth considering. But for those seeking something less risky, I think there are a few more stable options on the FTSE 100 right now.

The post Holding Diageo shares? Here’s what to expect from tomorrow’s results appeared first on The Motley Fool UK.

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Mark Hartley has positions in Diageo Plc. The Motley Fool UK has recommended Diageo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.