On Friday, Berenberg downgraded shares of Nestle SA (SIX:NESN:SW) (OTC: NSRGY (OTC:NSRGY)) from Buy to Hold, adjusting the price target to CHF99 from CHF116. The decision came after Nestle reported its first-half 2024 results, which showed a lower-than-expected organic sales growth at the group level.
Nestle's second-quarter organic sales growth was 2.8%, falling short of the Visible Alpha consensus expectations of 3.6%. This was primarily due to a modest price growth of 0.6%, which was significantly below the anticipated 2.5%. Despite this, the company did experience a 2.2% real internal growth (RIG), surpassing the forecast of 1.1%.
The performance varied across different regions. In North America and Latin America, organic sales growth stood at 2.3%, while Europe saw a higher growth rate of 4.6%. Asia, Oceania, and sub-Saharan Africa reported a growth of 3.4%. However, China faced a decline, with sales dropping by 0.6%. The Nespresso division and Nestle Health Science division saw growths of 2.6% and 1.9% respectively.
The actual sales for the second quarter of 2024 reached CHF22,953 million, which was 1% below the consensus expectations. However, the company's first-half adjusted EBIT of CHF7,841 million was 1% higher than what analysts had anticipated. Additionally, Nestle's adjusted earnings per share (EPS) of CHF2.40 for the first half of the year were 3% above consensus expectations.
The downgrade reflects concerns over the company's below-consensus organic sales growth for the first half of the year and the absence of immediate catalysts that could potentially reverse this trend.
In other recent news, Nestle SA has seen a series of significant developments. Deutsche Bank has revised its financial outlook on Nestle, lowering the price target from CHF110.00 to CHF106.00, while maintaining a Buy rating. The bank's analyst has adjusted the full-year 2024 like-for-like growth estimate for Nestle from 4.0% to 3.6%.
Additionally, Morgan Stanley has downgraded Nestle's rating from Overweight to Equal weight due to growth concerns, setting a new price target at CHF97.00. In contrast, Jefferies has maintained a Hold rating on Nestle while increasing the price target to CHF86.00.
Nestle Health Science has acquired the rights to Vowst, a pill-based treatment for Clostridioides difficile infections, from Seres Therapeutics (NASDAQ:MCRB), reporting net sales of $10.1 million in Q1 2024. JPMorgan has downgraded Nestle's stock from Overweight to Neutral, citing challenging quarters and a cautious outlook for FY 2024. The firm expects Nestle's like-for-like sales growth to be around 3.1%, falling below the company's guidance.
These are among the recent developments involving Nestle.
InvestingPro Insights
Following Berenberg's downgrade of Nestle SA, a deeper dive into the company's financials using InvestingPro data reveals a mixed picture. Nestle's market capitalization stands at a robust $258.3 billion, indicating its significant presence in the market. The company's Price to Earnings (P/E) ratio, a key indicator of valuation, is currently at 20.64, which adjusts to a slightly lower 18.59 when considering the last twelve months as of Q4 2023. This suggests that investors may be paying less for each dollar of earnings compared to the broader market, which could be attractive for value-oriented investors.
One of the notable InvestingPro Tips highlights that Nestle has been a consistent performer in terms of dividend payouts, having raised its dividend for 28 consecutive years and maintaining dividend payments for 33 consecutive years. This track record is a testament to Nestle's financial stability and commitment to returning value to shareholders. Additionally, the company is trading at a high Price to Book (P/B) multiple of 6.51 as of the last twelve months of Q4 2023, which often points to investor confidence in the company's future growth prospects.
For investors seeking a comprehensive analysis and additional insights, there are more InvestingPro Tips available, including whether the stock is in oversold territory based on the Relative Strength Index (RSI) and how its short-term obligations compare to liquid assets. To explore these tips and more, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With these insights, investors can make informed decisions about whether Nestle's current market position aligns with their investment strategy.
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