NSRGY Earnings: Nestlé Posts Tepid Outlook as Inflation Bites
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NSRGY Earnings: Nestlé Posts Tepid Outlook as Inflation Bites

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Nestlé expects sales growth to moderate this year as soaring inflation changes consumer buying patterns for the food and beverage sector.

Food and beverage giant Nestlé (OTC:NSRGY) (DE:NESM) reported sales of CHF 93 billion for Fiscal Year 2023, a decline of 1.5% over the prior year. Pricing gains of 7.5% contributed to the 7.2% organic growth for the company. Its operating profit margin expanded by 20 basis points to 17.3%, and EPS jumped by 23.4% to CHF 4.24. However, weak anticipated organic sales growth of 4% for 2024 is weighing on investor sentiment today. EPS for the year is seen rising by 6% to 10% in constant currency terms. The results highlight a shift in consumer behavior as inflation continues to bite.

After nearly two years of price hikes, Nestlé now plans to prioritize volume and product mix-driven growth. In 2023, the firm’s sales across its segments were driven by robust pricing actions. It will be interesting to see how shoppers react to easing prices (or easing price increases). The constant stream of rising prices has recently been met with pushback from grocery retailers such as Carrefour (FR:CA) (OTC:CRRFY) and E. Leclerc in Europe.

Separately, Nestlé plans to increase its dividend by 5 centimes to CHF 3 per share. If approved, this will be the company’s 29th consecutive annual dividend boost.

Is It Good to Invest in Nestlé?

Over the past three years, Nestlé’s stock price has ticked up by nearly 9.3% despite macroeconomic uncertainties and soaring inflation. The stock is currently trading at a price-to-earnings multiple of 29.

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