Citi Reaffirms Buy Rating on Nestle SA with Price Target of CHF105.00 Amid Anticipation of New CEO - Potential Strategic Changes Ahead
Citi has reaffirmed its Buy rating on Nestle SA (SIX: SW) (OTC: NSRGY), with a steady price target of CHF105.00 on the heels of the company's anticipation of the arrival of a new CEO in September. This move could potentially lead to strategic changes within the company, according to Citi analysts.
There are several levers that could be utilized to sustainably improve Nestle's real internal growth (RIG), which has seen recent setbacks. The analyst at Citi suggests that a price-led fiscal year 2025 margin reset could result in a mid-single-digit decrease in the consensus earnings per share (EPS).
In addition, a review of approximately 10% of Nestle's portfolio could unlock up to CHF12 billion. This capital could be reinvested in the company's core operations or used to simplify the business through joint ventures.
Citi also notes that a share buyback program funded by the sale of Nestle's stake in L'Oreal could enhance earnings per share, although it might not affect the company's valuation multiple. The firm believes that strategic choices regarding cleaner margin and pricing expectations could lead to upside potential for Nestle. The company's narrative is expected to be more compelling following a Capital Markets Day, where a detailed strategy update is likely to be provided.
In conclusion, the potential strategic changes at Nestle, including a new CEO and possible portfolio review, could impact the company's financial performance and stock valuation. Investors should keep an eye on upcoming developments and announcements from Nestle to make informed decisions about their investment strategies.