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On Thursday, Jefferies updated its assessment of Nestle SA (SIX:NESN:SW) (OTC: NSRGY (OTC:NSRGY)), increasing its price target to CHF75.00, up from the previous CHF67.00. Despite the adjustment, the firm maintained its Underperform rating on the company’s stock. The food products giant, with a market capitalization of $260.43 billion, currently trades at a P/E ratio of 21.35 and maintains a moderate debt level according to InvestingPro data.
The revision comes as the market anticipates Nestle (NSE:NEST)’s first quarter results for 2025, scheduled for April 24, and follows comments from peers regarding challenges in the U.S. market. Nestle’s shares have seen a remarkable 22.85% rise year-to-date, outperforming the Stoxx Europe 600 Index’s 7% gain. The increase in Nestle’s stock price is attributed to a "long-only squeeze," sparked by positive guidance regarding the company’s full-year 2025 outlook. The company has maintained dividend payments for 34 consecutive years, currently offering a 2.85% yield.Discover more insights about Nestle’s financial health and growth potential with InvestingPro, which offers 8 additional exclusive ProTips and comprehensive analysis.
However, recent signals from the U.S. market, which is crucial for Nestle, suggest potential headwinds. Analysts at Jefferies highlight concerns that an unimpressive start to the fiscal year 2025 may lead to questions about the company’s growth ambitions. Specifically, the modest increase of around 50 basis points in advertising and promotion spending and the operational margin target remaining above 16% could lead to doubts about the feasibility of Nestle’s margin expectations.
The analysis by Jefferies indicates that if the company’s performance in the early part of the year does not meet expectations, this could result in a downward adjustment of margin forecasts. Consequently, despite the upward revision of the price target, the firm’s stance on Nestle’s stock rating remains cautious, as reflected in the retained Underperform rating.
In other recent news, Nestle has faced several analyst evaluations that highlight challenges and potential risks for the company. Jefferies downgraded Nestle shares from Hold to Underperform, citing concerns over the late implementation of cost-cutting measures and ongoing inflation, which could impact operating margin forecasts and earnings per share (EPS). The firm also adjusted its price target for Nestle to CHF67.00. Similarly, Bernstein SocGen Group revised its price target for Nestle to CHF73, maintaining a Market Perform rating due to concerns over commodity price increases and potential negative revisions in 2025. Meanwhile, JPMorgan reiterated a Neutral rating on Nestle with a price target of CHF85.00, noting risks to Nestle’s earnings due to margin pressures and inflation in the cost of goods sold. These developments come as the company prepares to announce its full-year 2024 results and guidance for fiscal year 2025. Investors are paying close attention to these analyst insights, especially as Nestle approaches its Annual General Meeting in April, which could bring changes to the board.
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