In a report released on April 25, Olivier Nicolai from Goldman Sachs maintained a Buy rating on Nestlé SA (NSRGF – Research Report), with a price target of CHF97.00.
Olivier Nicolai has given his Buy rating due to a combination of factors including Nestlé’s strong sales performance and strategic pricing actions. The company’s Q1 sales showed a robust growth of 2.8%, driven by a positive real internal growth and effective pricing strategies, despite facing high input cost inflation in commodities like coffee and cocoa. Nestlé’s strong brand presence in coffee and confectionery, along with a rational competitive environment, supports the management’s ability to pass on these costs to consumers while testing price elasticity.
Another reason for the Buy rating is the improvement in key product categories such as frozen food and creamers in the US, and market share gains in coffee in Europe. Although there are challenges like soft pricing in pet food in the US and slower sales growth in Health Science, these are offset by long-term positives such as the discontinuation of private labels. Additionally, Nestlé’s valuation appears attractive, trading at a favorable price-to-earnings ratio compared to its historical performance and US food peers, with expectations of continued organic sales growth in the coming years.
NSRGF’s price has also changed slightly for the past six months – from $98.312 to $102.388, which is a 4.15% increase.