On Wednesday, Henkel AG (OTC:HENKY) & Co KGaA (HEN3:GR) (OTC: HENOY) saw its price target increased by Jefferies to EUR91.00, up from the previous target of EUR88.00. Despite the raised target, the firm maintained its Hold rating on the stock.
The adjustment comes as Jefferies anticipates that Henkel's operating margin for the fiscal year 2024 will outperform consensus estimates and exceed the company's own guidance, which is set between 13.5% and 14.5%. With a current gross profit margin of 48.8% and strong cash flows to cover interest payments, the company shows robust financial fundamentals.
The analyst at Jefferies projects that while the company's organic sales growth is expected to be in the lower half of the forecasted 2.5% to 4.5% range, this may raise concerns regarding which sales lines are underperforming. InvestingPro subscribers can access additional insights and metrics to better understand Henkel's growth trajectory.
The report acknowledges that Henkel's earnings per share (EPS) could surpass expectations in 2025 and 2026, bolstered by potential acquisitions and the resumption of stock buybacks. However, the analyst indicates that inconsistent organic sales growth could prevent the stock from maintaining its near-term price-to-earnings (PE) ratio of 14.5 times, estimating a possible de-rating to approximately 13.5 times.
The statement from Jefferies reflects a careful assessment of Henkel's financial outlook, balancing positive factors such as expected margin outperformance and EPS boosts against concerns over certain sales line trajectories. The firm's decision to uphold a Hold rating suggests a cautious stance, waiting for further evidence of consistent sales growth to potentially warrant a more bullish position.
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