On Wednesday, Nestle SA (SIX:NESN:SW) (OTC: NSRGY (OTC:NSRGY)) stock received an upgrade from Jefferies from 'Underperform' to 'Hold', with a slight increase in the price target to CHF87.00, up from CHF86.00. The revision comes in the wake of the company's first-half 2024 update.
The analyst cited several reasons for the change in rating, including Nestle's performance relative to the market. Year-to-date, the stock has seen a decline of 10%, compared to a 7% increase in the broader SXXP index.
This movement has resulted in a derating from 19 times to 17 times. Additionally, there have been approximately 5% cuts to the consensus forecasts for Nestle's full-year 2024 earnings per share (EPS).
Despite the challenging conditions, the analyst noted that half of Nestle's portfolio is in a strong position, with the potential to achieve around 4% sales growth. While the target range of 4-6% sales growth may be overly ambitious, the current consensus and valuation already reflect this outlook, according to the analyst.
The analyst's comments suggest a cautious recognition of Nestle's resilience in a "permanently changed environment." This perspective takes into account both the challenges faced by the company and the strengths within its diverse product portfolio. The updated price target and rating reflect a tempered view of the company's near-term prospects in the context of the current market conditions.
In other recent news, Nestle has experienced several significant changes in its financial outlook by various analysts. Deutsche Bank has shifted its rating for Nestle from "Buy" to "Hold", lowering its price target to CHF95, citing the company's tempered performance expectations.
Similarly, Berenberg downgraded Nestle's shares from "Buy" to "Hold", after reporting lower-than-expected organic sales growth in the first half of 2024. The company's second-quarter sales reached CHF22,953 million, falling 1% short of consensus expectations.
Morgan Stanley also revised its rating for Nestle from "Overweight" to "Equal weight", setting a new price target at CHF97, due to concerns over the company's growth potential. Another significant development was Nestle Health Science's acquisition of the rights to Vowst, a pill-based treatment for Clostridioides difficile infections, from Seres Therapeutics (NASDAQ:MCRB).
These recent developments reflect the evolving financial landscape for Nestle, as analysts adjust their expectations based on the company's performance and future growth prospects. It's important for investors to stay updated on these changes to make informed decisions.
InvestingPro Insights
As Nestle SA (NESN:SW) (OTC: NSRGY) navigates through a "permanently changed environment," real-time data from InvestingPro offers additional insights into the company's financial health and stock performance. With a market capitalization of $263.64 billion, Nestle operates with a moderate level of debt and a P/E ratio of 20.76, which is considered high relative to its near-term earnings growth. The company's P/E ratio has adjusted to 18.55 over the last twelve months as of Q2 2024, indicating a slight improvement in valuation.
InvestingPro Tips highlight that Nestle has a commendable track record of raising its dividend for 33 consecutive years, underscoring its commitment to returning value to shareholders. Furthermore, the stock is currently trading near its 52-week low and the Relative Strength Index (RSI) suggests that it is in oversold territory, which could interest value-oriented investors.
For those looking to delve deeper into Nestle's financials and stock performance, InvestingPro offers a wealth of additional tips. With the use of coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to an extensive range of analytical tools and data to inform investment decisions. There are 11 more InvestingPro Tips available for Nestle, offering a comprehensive analysis for investors.
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