Nestle stock upgraded at RBC on optimistic management comments

Investing.com -- Nestlé’s (SIX:NESN ) stock has been upgraded by RBC Capital Markets to "outperform" from “sector perform,” following positive comments from the company's management, especially during the third quarter results presentation. 

RBC's decision to raise Nestlé’s rating reflects a renewed sense of optimism surrounding the company’s strategic direction under new CEO Laurent Freixe.

RBC analysts flagged that Nestlé’s management demonstrated a pragmatic and transparent approach, which aligns closely with market expectations. 

According to analysts, Freixe's recognition that the company's planned investments will take time to pay off in significant productivity gains resonated well with them. 

Nestlé's long-term strategy was boosted by this realistic tone, particularly with regards to the possibility of margin slippage in 2025 before recovering in 2027.

Freixe's candid comments about Nestlé's intention to capture a bigger share of the global market, even in a challenging consumer environment, also encouraged RBC. 

Although Nestlé's market share may not grow significantly within existing markets, Freixe believes it maintains a competitive position within existing markets. 

The company’s willingness to invest in growth, even ahead of expected productivity gains, was seen as a sign of management’s commitment to sustainable long-term performance.

With minimal changes to their forecast models for 2025 and beyond, RBC analysts maintained their price target for Nestlé at CHF 93 per share. 

They see the stock as offering a compelling balance of risk and reward, underpinned by a growth forecast of 3.5% organic sales in 2026-27. 

Analysts emphasized that the company’s approach of aiming for lower but more realistic growth targets, compared to earlier guidance of 4-6%, offers a more achievable pathway to profitability.

Source: Investing.com