The last four years have been rough for Diageo (LSE:DGE) shares. The untimely loss of its CEO, strategic missteps, and adverse market conditions have all culminated in the branded beverages business losing over 50% of its market cap. But is that all about to change?
In 2026, the shares are actually beating the market, climbing by almost 15% versus the FTSE 100‘s 5%. And later this month, even more share price momentum could emerge, potentially igniting a multi-year recovery rally.
I may be wrong, of course, but here’s why I think it could happen.
A very important date
As we approach 25 February, investors are increasingly setting their sights on Diageo. Why? The company will be releasing its half-year results for the six months ending in December 2025.
But it’s not necessarily the financial performance that investors are watching. Rather, they’re tuning in to hear from new CEO Dave Lewis, who moved into the corner office at the start of 2026.
So far, Lewis has been fairly quiet in his communication with shareholders. But actions speak louder than words. And with the beverages giant already making moves to streamline operations and divest underperforming brands, ‘Drastic Dave’s’ turnaround strategy is now underway.
These upcoming results are when investors will be the first chance for investors to peek behind the curtain and discover what Lewis is planning. And if they like what they hear, then at a forward price-to-earnings ratio of 11.5, Diageo shares could start rallying.
What the experts are looking for
There are a lot of things Lewis needs to fix at Diageo. But the top three priorities that institutional analysts are anxious to hear about are:
- Debt reduction – how does Lewis plan to start fixing Diageo’s leveraged balance sheet?
- Brand disposals – which non-core brands are being divested?
- Dividends – will Lewis cut dividends to provide more financial flexibility in the short term?
Even if the financials for the first half of Diageo’s 2026 fiscal year disappoint, the stock may still enjoy a strong rally if the group outlines an aggressive debt reduction strategy. Similarly, the announcement of new meaningful cost-saving initiatives or the disposal of underperforming assets to bolster margins and raise capital are also potential positive catalysts.
However, it’s also possible that the double-digit momentum throughout 2026 so far makes a U-turn. That seems highly likely if Lewis keeps things vague and doesn’t announce concrete timelines for things like divestments and debt reduction. And even if he does, a dividend cut, even if it’s necessary, is likely to upset the apple cart.
What now?
With all this in mind, should investors consider buying Diageo shares ahead of what could be the most anticipated earnings call for the spirits sector in years?
There’s no way of accurately predicting what this stock is going to do over the short term. But it’s worth highlighting that even after its recent mini-rally, Diageo shares remain fairly cheap. And with numerous levers that Lewis can pull alongside his impressive track record of fixing other FTSE 100 businesses, I think there is room for cautious optimism.
As such, with a seemingly favourable risk-to-reward ratio, investors may want to consider taking a nibble through pound-cost averaging. Yet, this isn’t the only turnaround story that’s got me excited right now.
