Nestlé upgraded to Sector Perform by RBC noting recent earnings, forecasts

Nestlé (OTCPK:NSRGF) (OTCPK:NSRGY) Tuesday was upgraded by RBC Capital Markets to Sector Perform from Underperform, while its price target was tweaked to CHF96.00 from CHF97.00, as the brokerage noted Nestlé's 2023 results.

The food and beverage company last week posted a full-year EPS of CHF4.80, along with a revenue of CHF93B (-1.5% Y/Y). For 2024, Nestlé expected organic sales growth of around 4% and a moderate increase in the underlying trading operating profit margin.

For 2025, the company forecasted mid-single-digit organic sales growth and an underlying trading operating profit margin range of 17.5% to 18.5%.

"We believe that 2024 guidance for around 4% organic revenue growth is realistic, rather than conservative, as pricing tailwinds normalize. We're content for this to be the starting point for our forecasts in 2025 and 2026 as well," said analysts at RBC.

Eyeing the company's EBIT margin targets of the old 17.5-18.5% target for 2025, the financial services company said "We think that's ambitious: not absurd but not easy, either".

RBC expected the cost environment to normalize further offsetting moderating pricing and some operating deleverage from the Nestlé Health Science business in H1.

"Nestlé intends to increase marketing further in 2024, rightly so in our view, while everything we hear about premiumization, mix, and GLP1 convinces us that R&D is going to continue to be a meaningful object of investment," commented RBC analysts.

Since the start of the year, Nestlé has dipped about 8%. The stock has been rated a Hold by Seeking Alpha's Quant rating but received a Buy from sell-side analysts.