Diageo sales top expectations as US business improves

(Adds analyst comment, share activity)

By Martinne Geller

LONDON, Jan 26 (Reuters) - Diageo (LSE: DGE.L - news) , the world's largest distilled drinks company, reported a better than expected rise in sales on Thursday, helped by improvements in its U.S. business that boosted confidence in the company's future performance.

The maker of Johnnie Walker Scotch and Smirnoff vodka has been working to reinvigorate the business after years of tepid performance, with management changes and a greater focus on retailers' sales rather than wholesalers.

"The turnaround is on track," said Exane BNP analysts.

Diageo reported sales growth of 4.4 percent in the six months ended Dec (Shanghai: 600875.SS - news) . 31, above the average of analysts' estimates for growth of 3.4 percent.

The company said it remained confident it could hit its full-year target of "consistent mid single-digit top line growth and 100 basis points of organic operating margin improvement in the three years ending 30 June 2019".

Diageo's shares were up 4.7 percent at 2,242 pence by 0903 GMT.

"We regard these as a strong set of results and ... think they go a long way towards justifying Diageo's confidence," said RBC Capital Markets analysts.

Diageo said earnings per share, before one-off items, rose 21 percent to 62 pence, as higher operating profit and favourable exchange rates more than offset the impact of disposals and a higher tax rate. (Reporting by Martinne Geller; Editing by Greg Mahlich)