Analysts give a mixed view of Nestles results

Analysts give a mixed view of Nestle's results

Nestle this morning (18 October) booked an increase in sales in the first nine months of the year. The Swiss food giant, however, saw its share price slump as a number of one-offs hit revenue and growth slowed in Asia. Analysts give a mixed view of the group's results.

Andrew Wood, Sanford C. Bernstein

"Despite weakening organic growth, reported sales growth (+18.1%) came in strong, in-line with our estimate and well ahead of consensus (although it does appear that consensus contained some outlier FX estimates). Both FX (+10.5%) and M&A (+2.7%) were tailwinds. This is a major reversal from the significantly negative reported sales growth in 2011 (-10.1%).

"Management reiterated guidance for the "Nestlé Model" of 5-6% organic growth, with an increase in trading operating margin and underlying EPS in constant currency...but this was entirely expected and is not really additional good news. Instead we would expect investors to be somewhat disappointed with today's results and we expect the stock to weaken. We would not expect the very negative reaction seen by Danone yesterday (-4%)...because Nestlé does not seem to be facing the structural issues in a huge part of its business, like Danone, and is blaming "one-offs"."

Kate Laughrin, Metapraxis

"Today Nestle has released its sales figures showing an impressive 11.7% growth in emerging markets. With developed economies in Europe and North America still struggling, expansion into emerging regions has become a priority for many consumer goods multinationals and retailers.

"Given the high stakes involved in successfully capturing the growth in [emerging markets] - both short and long term - it is crucial for firms to get the strategy right in the face of competition from other multinationals as well as local players. Only by getting these strategies and processes right, will firms successfully expand into new markets and achieve ambitious growth targets as Nestle has done."

Jon Cox, Kepler Capital Markets

"Stripping out H1's organic sales growth of 6.6% implies a deceleration in Q3 growth toward 5.1% compared with an implied 6.4% consensus and Kepler 5.5%. Europe zone (which excludes separately reported divisions such as waters, nutrition and other F&B) appeared to report 0.9% Q3 growth vs 2.5% in Q2 while AOA zone saw an implied Q3 organic growth of 5% vs 11.8% in Q2. However, waters, nutrition and other showed similar if not better growth compared to Q2. Segments reported within zones such as prepared drinks, cooking aids, confectionery all saw a deterioration in growth.

"While the headline number is better on the back of a better currency and M&A contribution, the weaker than expected organic sales growth may dent the stock somewhat given it is seen as the safest bet in food, if not in Europe."