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Investing.com -- Jefferies has upgraded Danone (EPA:DANO) to “buy” from “underperform," raising its price target to €84 from €62, citing stronger-than-expected momentum in China’s specialised nutrition unit and sustained growth in North America’s high-protein dairy portfolio, in a note dated Tuesday.
The brokerage said they now see “a more sustainable run rate of growth” with risks of slowdown pushed to the second half of 2026.
The move marks a reversal of Jefferies’ downgrade last September, when concerns over U.S. creamers, China Waters and specialised nutrition weighed on sentiment.
U.S. creamers remain a drag, with Danone’s share in that market falling from 29% to 25% this year, but high-protein products have more than offset the weakness.
Oikos, now about 40% of the company’s U.S. yogurt portfolio, continues to expand at double-digit rates. “High-protein formats at BN remain a structural growth driver into FY26, supporting margin resilience,” the report noted.
In China, specialised nutrition has become a key driver. The company’s China, North Asia and Oceania segment reported 13% growth in the first half of 2025, accelerating to 15.5% in the second quarter.
English-label infant formula now makes up roughly 47% of sales, buoyed by e-commerce and new premium launches such as Aptamil Essensis. Aptamil’s market share rose to 15% this year, narrowing the gap with leader Feihe at 17%.
“Competitor subsidy/discount threats have had a limited impact on BNs momentum, as channel dynamics & Aptamil’s marketing clarity continues to support outperformance,” Jefferies said.
The brokerage lifted its 2027 operating margin forecast to 14.8% from 13.6%, about 80 basis points ahead of consensus.
The improvement is driven by product mix, stronger plant utilisation in Europe, and lower advertising-to-sales ratios after what analysts described as a “300bps ’correction’ over the past three years.”
Specialised Nutrition in China, with average margins around 35%, remains the group’s most profitable category.
Jefferies now expects Danone’s sales to grow 4% annually through 2027, up from its earlier 3.5% forecast.
Earnings per share for 2027 are projected at €4.51, 11% higher than previous estimates, with free cash flow to equity seen at 5.1% for FY26, ahead of peers Nestlé and Unilever at 4.5%.
“The additional leverage of the higher expectations for sales growth is enhanced by the higher gross margin exhibited on the sales in US protein and China Infant Formula,” the analysts said.
Europe remains mixed, with yogurt sales growing below 2% and declines in Actimel offset by double-digit gains at Alpro.
Still, Jefferies believes Danone can sustain modest European growth at about 1% in 2026.
The new price target implies a 12% upside from Danone’s Sept. 15 close of €74.80. “Until then, Danone can be further rewarded relative to struggling peers,” Jefferies added.