On Wednesday, Jefferies analyst team downgraded Nestle SA (SIX:NESN) stock from Hold to Underperform and adjusted their price target from CHF82.00 to CHF67.00. The revision comes as the food products giant, currently trading near its 52-week low at $82.51, prepares to release its full-year 2024 results on February 13. The upcoming announcement will include details on Nestle (NS:NEST)'s three-year cost-saving plan and guidance for the fiscal year 2025 operating margin.
The analysts at Jefferies expressed concern that the late implementation of cost-cutting measures, combined with ongoing inflation for key inputs, could lead to a reduction in consensus operating margin forecasts from 16.3% to 15.6%. This change, they caution, could pose a 3.5% risk to earnings per share (EPS), which currently stands at $4.75 on a diluted basis.
Furthermore, Jefferies anticipates that Nestle may announce a flat dividend per share (DPS) for 2024. They suggest that these potential disappointments could result in a decrease in the stock's price-to-earnings (PE) ratio on a next twelve months (NTM) basis, from 17 times to below 14 times.
The analysis by Jefferies indicates that while such a devaluation is not unprecedented based on historical data, it is significant enough to warrant the downgrade to Underperform. The new price target of CHF67.00 reflects these concerns and adjustments to their expectations for Nestle's financial performance.
In other recent news, Nestle SA has seen a flurry of analyst activity and internal changes. Goldman Sachs initiated coverage on Nestle with a Buy rating, pointing to its commanding market presence in several attractive segments. The firm's analysis suggests robust organic sales growth for Nestle, with an estimated increase of 4% due to its strong positioning in lucrative categories.
RBC Capital maintained its Outperform rating on Nestle, despite a slight decrease in the 2025 estimated EBIT margin due to rising cocoa and coffee prices. The firm remains confident in Nestle's future profitability, forecasting a 17.6% EBIT margin for 2027.
Morgan Stanley (NYSE:MS) upgraded Nestle's rating from Underweight to Equalweight, albeit reducing its price target. This adjustment comes after a period of underperformance and a recent company strategy meeting. Redburn-Atlantic also adjusted its financial outlook for Nestle, reducing the price target but maintaining a Neutral stance.
These are among the recent developments impacting Nestle's financial outlook. The company's strong market position, robust revenue, and consistent dividend payments have drawn attention from various analyst firms. As Nestle continues to refine its business strategy under new leadership, investors will be watching closely for future developments.
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