The market has been very nervous about the health of the US consumer and what that might mean for Diageo. Meanwhile, the situation in Latin America has taken a turn for the worse and caught the company and the market by surprise. Demand in the LAC region has softened for Spirits in particular, and visibility into the channel is more limited following significant expansion into the traditional trade in recent years. However, on the positive side, these are typically smaller outlets that are likely not holding significant levels of excess inventory, so we believe the correction should be quick. We now expect H1E organic sales +0.2% & organic EBIT -1.7%, followed by H2E organic sales +5.0% (easier comps) & organic EBIT +7.2%. For FY24E, we expect organic sales +2.4% & organic EBIT +1.8%. This is well below the medium-term guidance, but we expect a return to 5-7% organic sales growth in FY25E against what will be very easy comps from FY24. It is clearly unhelpful that this profit warning has occurred so early into the new CEO’s tenure. However, the share price reaction looks overdone to us. Diageo is now trading 17% below its 10-year average NTM PE ratio. The last time the stock reached the current PE level was back in 2014. While we understand there are reasons to be nervous, this is a business with an excellent track record, a well-balanced portfolio of brands across various price points and categories and exposure to strong market positions in the key emerging markets of India, China, Brazil & Mexico, among others. Its medium-term growth ambition of 5-7% is faster than many other large FMCG companies. At our unchanged 3,900p TP, Diageo would trade on 22.5x CY24E PE, hardly demanding for those familiar with the stock’s history.