NSRGY - Nestlé cut to Sell as RBC calls out decelerating sales trends

2023-03-06 08:37:53 ET

Nestle ( OTCPK:NSRGY ) stock slipped on Monday after RBC shifted to a Sell rating on the stock.

Equity analyst James Edwardes Jones indicated that while he still believes Nestle is “an excellently managed business”, market share gains may be difficult to come by. Additionally, the markets in which the company operates are growing at a quite slow pace.

“Nestlé’s organic sales growth, while better than Unilever's, has not been all that much better,” Jones commented. “The significant cut in marketing/sales – culminating in 2022’s estimated 100bps decline –is never something that makes us feel good about branded consumer staples companies’ prospects.”

He added that a significant chunk of the tailwinds aiding the company’s earnings in recent years have been tax and impairment related. These boosts have obscured decelerating sales trends to a degree, in his view. As such, the current premium to many of its peers is unjustified.

“Market growth of 3%, market share stasis and its financial performance are evidence of a company that, though impressive in many respects, is still a food company and should be valued accordingly,” Jones concluded. “We lower our price target to CHF95 and our rating to Underperform.”

Zurich-listed shares of the Swiss conglomerate fell 1.82% in afternoon trading on Monday.

Read more on the company’s planned price hikes for 2023 .

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