Why Diageo shares keep 14% sliding while BT 9% stages a comeback
Two of the FTSE 100’s most familiar names, Diageo and BT Group, delivered sharply contrasting fortunes for investors this week, as the Guinness maker’s shares tumbled to their lowest level in over a decade, while BT stock bounced back on steady earnings and renewed optimism.
BT: Relief rally after steady half year result
BT shares rose as much as 5% in early trading on Thursday, reaching around 190p, after half-year results reassured the city that the telecoms group is keeping its turnaround on track. The stock had fallen nearly 20% since July, when it hit a six-year high of 222p.
Underlying earnings for the second quarter came in flat at £2.1bn, slightly ahead of forecasts that predicted a small decline. Cost controls helped offset a 3% fall in revenues, as well as higher National Insurance contributions and the National Living Wage.
Key performance indicators showed growth in mobile and broadband customers, and line losses at BT’s Openreach division were no worse than expected.
Morgan Stanley, which holds a price target of 260p, said the numbers were “encouraging” as BT heads into its typically stronger second half.
“This performance gives us confidence in the full year outlook,” the bank said.
Chief executive Allison Kirkby reaffirmed guidance for the year to March and maintained a long, term free cash flow target of £3bn by the end of the decade double the £1.5bn expected for 2025/26.
BT’s full-fibre rollout is expected to complete by December 2026, which could pave the way for higher dividends. The interim dividend, payable on 11 February, has been raised 2% to 2.45p per share, in line with policy.
However, UBS remains cautious, maintaining its “Sell” rating, warning that Openreach may need to cut prices to stem line losses as providers like Sky and Vodafone move more business to alternative networks.
BT continues to forecast around 900,000 annual Openreach line losses, citing pressure from smaller “alt nets” and a weak housing market.
Diageo: Weak China sales hit global drinks giant
By contrast, Diageo shares fell below 1,700p for the first time in more than 10 years, marking a steep decline from 4,000p in April 2022. The latest drop followed disappointing updates from its Asia division, where demand for China’s national spirit, baijiu, has weakened significantly.
While the company reported solid growth in Scotch particularly Johnnie Walker and strong beer sales driven by Guinness, this was offset by sluggish demand in China and softness in the US spirits market.
Net sales were flat in the first quarter, as strong performances in Europe, Latin America and Africa were unable to offset Asian weakness.
Interim chief executive Nik Jhangiani said the company was “not satisfied” with its current performance and pledged faster action to drive efficiency and adapt to changing consumer habits.
“We are focused on what we can manage and control,” he said.
Jhangiani now expects full year net sales to be flat or slightly lower, a downgrade that aligns with City forecasts. However, UBS noted that the revised operating profit growth forecast now only low to mid, single digits was weaker than expected.
“Prolonged weakness in the industry could force Diageo’s board to unlock value through other means,” UBS warned.
Jefferies, meanwhile, set a price target of 2,400p, arguing that Diageo’s valuation 13.9 times expected 2026 earnings looks modest compared with the broader consumer staples sector, which trades closer to 16.8 times.
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Outlook: Two very different stories
BT’s steady progress and focus on cost control have helped restore confidence, even as regulatory and competitive pressures persist. For Diageo, however, the road to recovery may be longer, with investors looking for evidence that management can stabilize growth in key markets like China and the US.
