17 October 2024
If you are covering Nestle’s latest financial results, please find below a comment from Chris Beckett, head of equity research at Quilter Cheviot:
“Nestle’s recent woes continue after it delivered a weak quarter, missing expectations. The company is blaming weak consumer confidence and the macroeconomic backdrop for much of this, with little sign that things will improve in the near term.
“The best you can say is that sales are still increasing, via a mix of pricing power and volume, but for a company of Nestle’s quality and size you would hope this would translate into increasing earnings, but these are only expected to be flat. Defensive companies in defensive sectors produce continued earnings growth, but Nestle is failing on this just now.
“Europe, Latin and North America were particularly poor regions, with China the surprise standout performer. Given the economic stimulus announced there, we may start to see sustained demand return to the country.
“Ultimately, Nestle remains a good company but it is going through a challenging period. The new CEO is implementing quite a wide-ranging internal reorganisation to help get the business back on track. It had perhaps got a little too inward looking and thus a reset is a good strategy to undertake. With its capital markets day in November it will be wanting to get the bad news out now, with the hope things can start to turn around quite quickly from here.”
