Nestle Stock: Citi Analysts See Upside

Citi analysts expressed optimism about Nestlé's stock in a note to clients this week, telling investors they anticipate a potential upside driven by strategic changes under the leadership of its incoming CEO.

According to the Citi research note, the company's new CEO, starting in September, is expected to focus on strategies to bolster the company's organic revenue growth (RIG) following recent disappointments.

As the company prepares for a potential strategy update and amid industry-wide pricing pressures, Citi analysts highlight several key areas:
Firstly, the analysts believe there is room for a price-led margin reset in fiscal year 2025, which could lead to a downside impact on earnings per share (EPS) consensus.

Secondly, they anticipate a review of approximately 10% of Nestlé's portfolio, potentially freeing up to CHF12 billion for reinvestment in core businesses or to reduce complexity through joint ventures.

Furthermore, while a share sale in L'Oreal could provide a short-term boost to EPS, Citi analysts suggest it may not significantly impact the stock's multiple.

They state: “We see upside from strategic optionality on cleaner margin/pricing expectations, but see the story as more compelling post a CMD [capital markets day].”

Citi's note suggests that Nestlé's stock could benefit from the new CEO's strategic initiatives, which could lead to improved financial performance and increased investor confidence.

Nestle shares are trading around 0.9% higher so far in Tuesday's session.