On Thursday, Citi reaffirmed its Neutral rating and €83.00 price target on Henkel AG (OTC:HENKY) & Co KGaA (HEN3:GR) (OTC: HENOY). Citi's position reflects an anticipation of potential upside in the second quarter due to several factors. Firstly, the analyst predicts improved consumer volumes, supported by an easing comparison base.
Additionally, the first half margins could benefit from consumer cost of goods sold (COGS) tailwinds, which might not be entirely offset by reinvestments, as savings could act as an alternative funding source.
The outlook for Henkel's adhesives segment is cautiously optimistic, despite recent warnings in the industrial sector. The nature of the company's contracts, a supportive Industrial Production Index (IPX) tailored to Henkel's geographical exposure, and favorable calendar effects are expected to mitigate early concerns for the second half volumes.
However, Citi suggests that any potential downside risks are unlikely to emerge before the third quarter. These risks could arise if consumer pricing faces pressure or if adhesive volumes are affected by a downturn in industrial orders, though such impacts might occur with a delay.
In other recent news, Henkel AG & Co KGaA has been the focus of an updated analysis by Deutsche Bank (ETR:DBKGn), which has raised its price target for the company's shares to €77.00 from the previous €75.00. This adjustment is primarily due to the company's robust forward 12-month earnings per share (EPS) projections and strong gross margin results. Deutsche Bank's assessment also highlighted the company's solid valuation, now aligning with the median valuation of Deutsche Bank's coverage, excluding L'Oreal.
In addition to Deutsche Bank's evaluation, Citi maintained a neutral view on Henkel, with a stock price target of EUR72.00. Citi's projections for fiscal year 2023 indicate an Organic Sales Growth (OSG) of around 2.7%, with volume growth contributing a minor 0.6%. Despite a predicted fourth quarter decrease, Henkel's pricing strategies are expected to remain favorable.
Citi has also upgraded its margin forecast for Henkel for fiscal year 2024, predicting the company's overall margin to reach 13.2%. This upgraded margin outlook has led to a 0.6% increase in the fiscal year 2024 EPS estimate. Adjusted for constant foreign exchange rates, the EPS is expected to grow by roughly 12%. These are the latest developments for Henkel AG & Co KGaA.
InvestingPro Insights
As investors weigh Citi's neutral stance on Henkel AG & Co KGaA, real-time data from InvestingPro provides a deeper financial perspective on the company. With a market capitalization of $33.37 billion and a P/E ratio of 23.73, Henkel appears to be trading at a premium compared to its near-term earnings growth. However, the adjusted P/E ratio for the last twelve months as of Q4 2023 is more favorable at 18.04, indicating that the company's earnings might be more robust than the current P/E suggests.
Despite a slight revenue decline of -3.94% over the last twelve months as of Q4 2023, Henkel maintains a healthy gross profit margin of 45.75%, demonstrating its ability to retain earnings relative to sales. The company's financial stability is further underscored by an Operating Income Margin of 12.46% and its ability to cover interest payments with current cash flows. Additionally, Henkel has upheld dividend payments for 30 consecutive years, with a dividend yield of 1.5% as of the latest data, reflecting a commitment to shareholder returns.
InvestingPro Tips highlight that Henkel operates with a moderate level of debt and has liquid assets exceeding short-term obligations, signaling a solid financial position. Moreover, analysts predict the company will remain profitable this year, a sentiment supported by a profitable track record over the last twelve months. For investors seeking more comprehensive analysis, there are additional tips available on InvestingPro, including insights on Henkel's performance relative to its 52-week high and dividend growth trends. Readers can explore these insights further and take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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