On Thursday, RBC Capital reiterated its Sector Perform rating for Nestle SA (SIX:NESN:SW) (OTC: NSRGY (OTC:NSRGY)) with a steady price target of CHF93.00. The decision follows the company's updated guidance for the year, indicating a slowdown in organic sales growth and a stable earnings outlook.
Nestle's new forecast anticipates organic sales growth of around 2%, a decrease from the previous expectation of at least 3%. This adjustment positions the company's projections well below the compiled consensus of 2.8%.
Furthermore, the expected EBIT margin has been revised to 17.0%, slightly under the consensus of 17.3%. Additionally, constant currency EPS growth is now predicted to remain flat, a shift from the prior guidance of a mid-single-digit increase.
The analyst from RBC Capital commented on the revised guidance, suggesting that while the changes are not ideal, they do not significantly impact the long-term investment case for Nestle. The analyst's forecasts for 2025 had already incorporated a considerable margin decline and modest sales growth.
The updated, more cautious, and realistic guidance for 2024 aligns with what RBC Capital had anticipated, especially as further medium-term projections are expected at the upcoming Capital Markets Day.
This reassessment by Nestle aligns with RBC Capital's outlook, which had been seeking a more prudent approach to the company's guidance. The analyst's perspective indicates that the revised figures for the upcoming year are part of a larger, more conservative strategy that Nestle is adopting for its future financial planning.
InvestingPro Insights
While Nestle faces challenges in organic sales growth, InvestingPro data reveals some interesting aspects of the company's financial health. Despite the revised guidance, Nestle maintains a robust market capitalization of $256.73 billion, underscoring its position as a major player in the global food industry.
InvestingPro Tips highlight Nestle's strong dividend history, having raised its dividend for 28 consecutive years and maintained payments for 33 years. This consistent dividend policy could be attractive to income-focused investors, especially with the current dividend yield of 2.85%.
The company's P/E ratio of 17.4 (adjusted for the last twelve months as of Q2 2024) suggests a relatively reasonable valuation compared to its peers, aligning with RBC Capital's Sector Perform rating. However, it's worth noting that Nestle is trading near its 52-week low, which may present an opportunity for value investors.
InvestingPro offers additional insights, with 7 more tips available for subscribers looking to delve deeper into Nestle's financial outlook and market position.
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