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MarketScreener Homepage  >  Equities  >  Swiss Exchange  >  Nestlé S.A.    NESN   CH0038863350


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Nestlé Toughs It Out in the Kitchen

10/21/2020 | 09:23am EST

By Carol Ryan

For household staples companies, it now makes a big difference whether your brands replenish people's pantries or their cleaning supplies. Over time, Nestlé is betting that health concerns take a different turn.

The Swiss food giant is the third large consumer-goods company to up its full-year guidance this week. It said on Wednesday that sales increased by 4.9% in the three months through September, stripping out changes in exchange rates and the portfolio -- its strongest quarterly growth rate in six years. Even so, Nestlé expects sales for the full year to grow at a modest 3%. Back in July, the company expected growth to come in around 2% to 3%.

For now, it is significantly lagging both Reckitt Benckiser and Procter & Gamble, which reported quarterly growth of 13.3% and 9% respectively and raised their guidance on Tuesday. The obvious reason is that the Nespresso coffee owner doesn't sell cleaning or disinfectant brands, which are flying off supermarket shelves.

The impact of Covid-19 on food companies is mixed. Nestlé's water brands -- usually consumed in restaurants or on the go -- are suffering. So are candy snacks like Milkybar, which consumers tend to buy when they are out and about. Sales of its "out of home" products, which generate up to 15% of group sales, were down 26% in the third quarter and will be a drag for some time.

There are compensating trends: As people spend more time at home, Nestlé's coffee and petcare brands are benefiting, while sales of dairy and ice-cream products grew by 10.6% in the quarter, according to Barclays estimates. Previously unfashionable in certain markets, consumers are buying more fortified milk products to boost their immune systems during the pandemic.

Nestlé's ambitions in food science could provide a boost over time as people do more to protect their health and avoid infection. Thanks to higher demand for nutrition supplements, sales in its health-science division are growing at a double-digit clip. The company has a new target for them to reach around $4.4 billion over the next year or so -- double the 2017 level -- and has done four deals in the space this year. Its purchase of Aimmune Therapeutics closed last week in a deal that valued the biopharmaceutical food allergy business at $2.6 billion.

Demand for cleaning products won't remain sky-high forever, although consumers will probably be preoccupied with hygiene long after the worst of the pandemic has passed. Compared with the roughly 15% share-price gains at P&G and Reckitt Benckiser this year, Nestle's 10% increase in dollar terms has been more muted. But it may also benefit from a longer-term health kick.

Write to Carol Ryan at carol.ryan@wsj.com

(END) Dow Jones Newswires

10-21-20 0922ET

Stocks mentioned in the article
ChangeLast1st jan.
NESTLÉ S.A. -0.31% 99 Delayed Quote.-5.52%
RECKITT BENCKISER GROUP PLC 2.13% 6436 Delayed Quote.5.01%
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Sales 2020 84 952 M 95 375 M 95 375 M
Net income 2020 11 698 M 13 133 M 13 133 M
Net Debt 2020 30 206 M 33 913 M 33 913 M
P/E ratio 2020 24,4x
Yield 2020 2,75%
Capitalization 276 B 309 B 310 B
EV / Sales 2020 3,60x
EV / Sales 2021 3,57x
Nbr of Employees 291 000
Free-Float 93,5%
Duration : Period :
Nestlé S.A. Technical Analysis Chart | MarketScreener
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Technical analysis trends NESTLÉ S.A.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 28
Average target price 117,09 CHF
Last Close Price 99,00 CHF
Spread / Highest target 31,3%
Spread / Average Target 18,3%
Spread / Lowest Target -5,05%
EPS Revisions
Ulf Mark Schneider Chief Executive Officer & Director
Paul Bulcke Chairman
Magdi Batato Executive Vice President-Operations
François-Xavier Michel Marie Roger Chief Financial Officer & Executive Vice President
Stefan Palzer Chief Technology Officer
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1st jan.Capitalization (M$)
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