Opinions
Darren Sissons
Nestle
NSRGY-OTC
COMMENT
Jan 31, 2018
Stock price when the opinion was issued
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Trading near a 10-year low. They own 20% of L'Oreal. Trades at 14x PE. Coffee is 25% of their business. They have 30 brands with $1 billion of sales. The new CEO will prune the underperforming assets. Strong growth ahead. The stock is on sale, because growth slowed due to carrying too brands.
(Analysts’ price target is $106.88)Consumer staples are outperforming in the last few days, and that speaks to the advantage of having a balanced portfolio. Companies like KHC, UL, KVUE, and Nestle. It's not that they won't be affected (their costs would go up), but they're far less cyclical than other businesses. Earnings will be much more stable. Earnings could fall 10%, but not 50%. Dividends will be sustained.
Companies like Unilever and Nestle are huge in NA, but huge globally as well.
This has been diversifying into things like vitamins, etc. The new CEO is the 1st non-Swiss insider to run the company since about 1905. He is looking to improve the working capital management of the company, which is releasing capital. It’s a gradual, slow growth dividend story, which he likes. Earnings are attractive. The downside is that it is so large that no one can buy it, so there is no long-term upside from that. Feels it has upside from here.