Nestle, More Coffee Please, Analysts Review, Target, Q1 Highlights and Guidance

Nestle S.A. (OTCPK: NSRGY) is the world’s largest food and beverage company with operations in 189 countries across the globe. The company has over 2000 products in its portfolio and is well diversified across various consumer defensive operating segments.


The company recently announced its first-quarter results and reported a solid start to the year, which is fully in line with the company’ guidance for 2018. Growth was broad-based across geographies. It was also in line with the expectation the company articulated in February that its 2018 organic growth would improve over the levels it saw in 2017.


Key highlights from the recent results:

  • Organic growth of 2.8%, with 2.6%-real internal growth (RIG) and pricing of 0.2%.
  • Total sales increased by 1.4% on a reported basis to CHF 21.3 billion (3M-2017: CHF 21.0 billion). Net acquisitions had a positive impact of 0.2% and foreign exchange reduced sales by 1.6%.
  • Portfolio management strategy on track. The acquisition of Atrium Innovations was completed at the beginning of March, and the sale of the U.S. confectionery business concluded at the end of March. Agreements reached to acquire Terrafertil and to divest the waters business in Brazil.
  • Full-year guidance for 2018 confirmed.


Three-month performance highlights:

Key guidance for 2018:

  • Organic sales growth of 2% to 4%
  • Underlying trading operating margin improvement in line with 2020 target
  • Restructuring costs are expected at around CHF 700 million
  • Increase in underlying EPS** and capital efficiency


In another announcement made on 7 May, the company announced an agreement granting the company the perpetual license to market Starbucks consumer and foodservice products globally, outside of Starbucks coffee shops, that are not part of the transaction. The business included in the agreement generated approximately USD2.0 billion of revenues in 2017. As part of the transaction, Nestlé will pay an up-front cash payment of USD7.15 billion. The deal is expected to close by the end of 2018


The transaction does not include the transfer of any fixed assets, which facilitates a smooth and efficient integration. Nestlé expects this business to contribute positively to its earnings per share and organic growth targets as from 2019. Nestlé’s ongoing share-buyback program will remain unchanged.


This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé. Moreover, the transaction is a significant step for its coffee business, Nestlé’s largest high-growth category.


Analysts tracking the stock believes that the company’ business risk profile continues to remain robust, led by its consumer defensive businesses, highly diversified market risk profile, and exhaustive product profile involving more than 2,000 brands. Furthermore, continuous diversification of the product profile through successful new launches has helped the company sustain growth and reduce dependence on a few flagship brands.


Moreover, NSRGY’ financial profile is also expected to remain comfortable, supported by high cash generation as reflected in its attractive dividend yield, moderate CapEx plans, and prudent working capital management. Liquidity continues to remain robust led by sizeable cash surpluses, and the company has approximately $10 billion in cash/short-term investments and $6 billion in long-term investments.  Existing financial flexibility, along with an expectation of stable cash flow generation from operations are sufficient to cover the group’s capital expenditure, dividend payments, and short-term debt.


Considering all this, the company is in an extremely favorable risk-reward position, and value investors should consider exposure in this defensive play. Also, NSRGY defensive business assures capital protection along with a stable dividend yield. The present consensus target for the company is $84.50, with a high estimate of $100.00 and a low estimate of $70.00.


First Quarter 2018 Results:

Revenue: Organic growth reached 2.8% and was within guided range for 2018. Excluding the U.S. confectionery business, organic growth was 2.9%. RIG accelerated to 2.6% and continued to be at the high end of the food and beverage industry. Pricing was 0.2%, mainly reflecting lower levels of inflation in emerging markets. Net acquisitions increased sales by 0.2% as the acquisition of Atrium Innovations was completed at the beginning of March. Foreign exchange had a negative impact of 1.6%. Total sales increased by 1.4% on a reported basis to CHF 21.3 billion. All categories had positive growth, led by petcare, coffee, and Nestlé Health Science.


Growth by-products:


Unique differentiating factors:

  • Stable business profile, led by its number one position as the largest food and beverage group in the world by revenues;
  • Well diversified regarding business segments, product, and geography, with an improving presence in emerging markets;
  • substantial asset base that could be monetized, including its investment in L’Oréal S.A.
  • Focus on cost efficiency and continued strong brand equity which mitigates price and economic volatilities.


Risk factors:

The company has a high long-term debt of $27 billion, and Starbuck deal could deteriorate company’ liquidity to an extent.  Nevertheless, Nestlé’s liquidity profile is expected to remain strong. Nestlé also benefits from its 23.2% stake in L’Oréal, which could also be, monetized if necessary.


The fast-moving consumer goods (FMCG) industry has organized and unorganized players across segments. Therefore, players such as Nestle need to regularly introduce innovate products, introduce differentiators and refreshes, and build on their reach and distribution to sustain market share as well as profitability.


Stock Chart:


  • On Wednesday, June 6th, 2018, NSRGY closed at $75.37, on an average volume of 456,676

Shares are exchanging hands. Market capitalization is $227.56 billion. The current RSI is at 38.16

  • At $75.37, shares of NSRGY are trading below its 50-day moving average (MA) at $77.30 and below its 200-day moving average (MA) at $82.32
  • The present support and resistance levels for the stock are at $74.0767 & $76.0167 respectively.



Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
17B Disclosure
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.