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On Friday, Citi maintained its Buy rating on Nestle SA (SIX::SW) (OTC: NSRGY (OTC:)), the Swiss multinational food and beverage company. The firm anticipates a stronger second half of the year for the company, despite potential challenges in the first quarter.
Citi acknowledges the upcoming Q1 report from Nestle on April 25 may not dispel all investor concerns regarding the company’s sales trajectory in the post-COVID and post-inflation landscape. The firm notes that the Vitamin, Minerals and Supplements (VMS) segment has not yet shown signs of recovery, which is key to reassuring investors about the strategic decisions made by Nestle’s CEO.
The capacity expansion in Nestle’s pet food segment has not yet had a material impact, according to Citi. This situation is compounded by the current state of the U.S. consumer environment, which is only expected to show improvement from the second quarter onwards.
Despite these short-term challenges, Citi suggests that Nestle could be a recovery trade in the second half of the year. The firm’s outlook remains positive, with expectations of a turnaround as the year progresses. Citi’s reiteration of its Buy rating reflects confidence in Nestle’s potential for growth and recovery in the latter part of 2024.
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