CFRA has downgraded shares of Heineken (AS:HEIN) (HEIA: NA) (OTC: HEINY (OTC:HEINY)) from Buy to Hold, adjusting the price target to €92.00 from the previous €105.00.
The revision, supported by the beverage company's strong branding, reflects a 16.5 times forward price-to-earnings ratio for 2025, which is a premium compared to the industry's average of 15.5 times.
The downgrade follows Heineken's first-half 2024 report, which showed net revenues of €14.8 billion, falling short of the expected €15.2 billion. Organic growth in net revenue was 6.0%, primarily driven by a 4.3% increase in price, while volume growth was more modest at 1.7%. Concerns were raised that continued price hikes might negatively impact volumes and market share towards the end of 2024.
Heineken has updated its forecast for adjusted operating profit growth in 2024 to 4-8%, a scale-back from its previous projection of low to high single-digit growth. This change suggests potential downside risks compared to the current consensus target of 8.2% growth, noted an analyst from CFRA.
CFRA also noted a non-cash impairment on Heineken's investment in CR Beer, alongside the revised earnings per share (EPS) estimates for the coming years. The EPS has been adjusted to €4.66 for 2024, down from €5.45, and to €5.59 for 2025, from the earlier estimate of €6.22.
Meanwhile, Jefferies has also maintained a positive stance on Heineken, showing a strong first-half performance, a stabilizing market in Vietnam, and increasing volumes in Europe. The company's multi-year transformation program is expected to drive superior growth and margin expansion.
RBC Capital has adjusted its price target for Heineken to EUR77.00, up from EUR75.00, but maintains an Underperform rating. Despite first-quarter sales that exceeded expectations, RBC Capital remains skeptical about the sustainability of Heineken's price/mix growth due to broadly declining inflation.
InvestingPro Insights
In light of CFRA's recent downgrading of Heineken, a glance at the real-time data from InvestingPro provides a broader financial perspective on the company's performance. Heineken's market capitalization stands at a solid $50.33 billion, reflecting its substantial presence in the beverage industry. The company's P/E ratio, at 20.3, is above the industry average, aligning with CFRA's assessment of its premium valuation. However, when looking at the adjusted P/E ratio for the last twelve months as of Q4 2023, it appears more favorable at 17.33.
InvestingPro Tips highlight Heineken's consistent dividend payments for 33 consecutive years, which could be a reassuring factor for income-focused investors, especially when the stock is trading near its 52-week low. Moreover, analysts predict profitability for the year, supported by a positive revenue growth of 5.72% over the last twelve months as of Q4 2023. Despite short-term challenges, these factors may offer a degree of resilience.
For those considering a deeper dive into Heineken's financial health and future prospects, InvestingPro offers additional insights and tips on their platform. To enhance your investment research, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 5 more InvestingPro Tips available that could further inform your investment decisions regarding Heineken.
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