Emerging Market Opportunity, Growth Potential Make Diageo (DEO) Solid Global Play - Cramer
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Price: $94.62 +0.82%
Rating Summary:
14 Buy, 11 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
14 Buy, 11 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Diageo plc (NYSE: DEO), the distributor of such fan favorites as Smirnoff, Crown Royal, Guinness and Captain Morgan, may be a great play on the global economic rebound, according to Jim Cramer.
On his CNBC Show Mad Money Tuesday night, Cramer said his thesis is based on worldwide growth in top shelf liquor sales. With just 10 percent of sales coming from Asia, Cramer believes Diageo could easily double this figure over the next few years. Specifically for the Chinese market, top shelf brands account for just 1 percent of total liquor sales.
Cramer also noted other emerging markets, such as Latin America, provide additional areas for expansion.
Diageo has also taken steps to cut costs, streamline management, and pile cash back into emerging markets to capitalize on opportunities.
The company currently generates about $2 billion in free cash flow and sees organic growth of 7 percent annually. Both metrics could provide Diageo the means to make smart acquisitions in the near future, Cramer argues. Case in point: rumors suggest Diageo is considering a move to acquire all of the Jose Cuervo Tequila brand (the company currently only owns distribution rights to the brands).
Trading at just 15 times earnings, Cramer calls the stock cheap and admits it is his favorite spirit stock.
Shares of Diageo are up just 0.2 percent to $85.24 just after Wednesday's opening bell.
On his CNBC Show Mad Money Tuesday night, Cramer said his thesis is based on worldwide growth in top shelf liquor sales. With just 10 percent of sales coming from Asia, Cramer believes Diageo could easily double this figure over the next few years. Specifically for the Chinese market, top shelf brands account for just 1 percent of total liquor sales.
Cramer also noted other emerging markets, such as Latin America, provide additional areas for expansion.
Diageo has also taken steps to cut costs, streamline management, and pile cash back into emerging markets to capitalize on opportunities.
The company currently generates about $2 billion in free cash flow and sees organic growth of 7 percent annually. Both metrics could provide Diageo the means to make smart acquisitions in the near future, Cramer argues. Case in point: rumors suggest Diageo is considering a move to acquire all of the Jose Cuervo Tequila brand (the company currently only owns distribution rights to the brands).
Trading at just 15 times earnings, Cramer calls the stock cheap and admits it is his favorite spirit stock.
Shares of Diageo are up just 0.2 percent to $85.24 just after Wednesday's opening bell.
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