On Monday, Jefferies, a global investment banking firm, revised its price target for Nestle SA (SIX:NESN:SW) (OTC: NSRGY (OTC:NSRGY)), reducing it to CHF84.50 from the previous CHF86.00. The firm maintained its Underperform rating for the Swiss multinational food and drink processing conglomerate. The adjustment comes ahead of Nestle's first quarter 2024 results, which are scheduled to be released on April 25, 2024.
The price target revision reflects a modest 1% decrease in the expected earnings per share (EPS) for the fiscal years 2024 and 2025. Jefferies' analysis indicates concerns over a potential shortfall in the company's organic sales growth (OSG) for fiscal year 2024. The firm's estimate for OSG stands at 3.4%, compared to the Visible Alpha Consensus of 4.1%.
The report from Jefferies suggests that the current trajectory and changes at Nestle do not fully align with the company's historical average growth rate or its long-term guidance. Nestle's average annual growth rate was 3% between 2016 and 2019, which is below the company's targeted range of 4-6%.
The investment firm's stance is that the momentum and changes within Nestle's portfolio are not yet convincing enough to alter their view on the stock. The analysis indicates that while there has been some improvement, the current pace does not meet the threshold that would warrant a more optimistic outlook.
Investors will be looking to the upcoming quarterly report to gauge whether Nestle can meet or exceed the growth expectations set by the market and to assess the company's performance in light of the revised projections by Jefferies.
InvestingPro Insights
As Nestle SA (NESN:SW) (OTC: NSRGY) prepares to release its first quarter 2024 results, investors are closely monitoring the company's financial health and market position. According to InvestingPro data, Nestle boasts a robust market capitalization of 275.42 billion USD and maintains a Price/Earnings (P/E) ratio of 22.28, which adjusts to a slightly more attractive 19.75 when considering the last twelve months as of Q4 2023. Despite the challenges highlighted by Jefferies, Nestle's PEG ratio—a metric that relates the P/E ratio to earnings growth—stands at 0.93, suggesting that the stock may be reasonably valued with respect to its earnings growth.
On the dividend front, an InvestingPro Tip highlights Nestle's impressive track record of raising its dividend for 28 consecutive years, a testament to its commitment to returning value to shareholders. Another notable InvestingPro Tip points out that Nestle is trading at a low P/E ratio relative to near-term earnings growth, which could signal an investment opportunity for those looking at the fundamentals.
For investors seeking more detailed analysis and additional InvestingPro Tips, there are 9 more tips available that could provide deeper insights into Nestle's financials and market performance. These tips can be accessed through InvestingPro's platform at https://www.investing.com/pro/NSRGY, and readers can benefit from an extra 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24.
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