Nestle Sales Beat Analysts' Estimates on Uptick in Pricing

  • Food company raises pricing 1% amid weak consumer market
  • Nespresso’s U.S. sales, Nescafe price increases add to growth

Kepler Cheuvreux's Cox Thinks 2H Will Be Good for Nestle

Nestle SA, the world’s biggest food company, reported first-quarter revenue growth ahead of analysts’ estimates and an uptick in pricing, a signal of possible improvement in a sluggish food and beverage market.

Sales rose 2.3 percent on an organic basis, the Vevey, Switzerland-based maker of KitKat chocolate said Thursday. Analysts expected 2 percent. Nestle’s pricing rose 1 percent compared with 0.9 percent in the fourth quarter. The stock rose as much as 1.1 percent in Zurich.

The slight improvement in pricing gives a glimmer of hope the food and beverage market may show some recovery, according to MainFirst Bank analyst Alain Oberhuber. It comes the same day Unilever announced better-than-expected revenue growth. In February, Nestle’s new Chief Executive Officer Mark Schneider abandoned sales and profit forecasts the Nescafe maker had held onto for a decade and replaced them with a goal to jump-start revenue by 2020.

“The positives are the acceleration in Europe and Asia with pricing getting better in Western Europe, even if it is still negative,” said Jon Cox, an analyst at Kepler Cheuvreux. “The negative is the Americas, where North America is fragile, something of a surprise given the strong macro outlook there, and Brazil continues to suffer from last year’s price increases.”

Revenue in Europe, the Middle East and North Africa rose 1.7 percent, beating the 0.5 percent analyst estimate. In Asia, Oceania and sub-Saharan Africa, revenue growth was 4.5 percent. Analysts expected 2.5 percent.

Still, it’s Nestle’s slowest quarterly revenue growth this century, according to Andrew Wood, an analyst at Sanford C. Bernstein. A later Easter in 2017 pushed chocolate orders into the second quarter from the first this year.

Nestle confirmed its 2017 forecast. The maker of Lean Cuisine meals said in February it expects organic revenue growth of 2 percent to 4 percent and a margin near last year’s due to restructuring.

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