Nestlé Shares Face Stagnation as Growth Concerns Mount

Nestle CH0038863350

Analysts at Bernstein Research have set a price target for Nestlé shares at 79 Swiss francs, a figure that aligns almost perfectly with the stock's current trading level. This positioning sends a clear signal to investors anticipating a strong year-end rally: expectations should be tempered. The core issue, according to the firm's assessment, is deeply rooted in the company's fundamental operations.

Key Data Points:
- Bernstein reaffirms a "Market-Perform" rating with a 79 CHF target.
- Current share price: 78.74 CHF (indicating upside potential of less than 1%).
- The divestment of the remaining stake in Herta has been finalized.
- A lack of volume growth remains the primary operational challenge.

Amid these operational headwinds, Nestlé continues to execute its strategic refocus. The company finalized the sale of its remaining 40% interest in the processed meat business Herta Foods to Casa Tarradellas on December 23. This move marks Nestlé's complete exit from the meat products sector.

Proceeds from this divestment are earmarked for reinvestment into categories with stronger growth profiles, such as coffee, pet care, and health science. The transaction underscores the long-term strategy of pruning lower-margin segments from the portfolio.

The Price-Volume Dilemma Weighs on Performance

Bernstein analyst Callum Elliott pinpointed the central dilemma: Nestlé continues to successfully implement price increases, but this comes at the cost of declining sales volumes. This widening gap between price and volume is increasingly acting as a drag on organic growth. While some peers in the food manufacturing sector have recently shown improvement, the Swiss conglomerate remains stuck in this challenging dynamic.

Market participants had held out hope for a stabilization in volume trends by the end of the year. Bernstein's current analysis significantly dampens those expectations.

Limited Near-Term Outlook

With shares trading at 78.74 CHF, the stock is effectively pinned to the analysts' price target. As long as no reversal in the volume trend becomes visible, the potential for significant upward movement appears capped. While the strategic task of the Herta exit is now complete, the operational momentum required to drive a sustained re-rating of the stock remains absent.