On Friday, Jefferies adjusted its stance on Henkel AG (OTC:HENKY) & Co KGaA (HEN3:GR) (OTC: HENOY) stock, downgrading it from Buy to Hold and reducing the price target to €88 from €92. The revision follows a reevaluation of the company's growth and margin outlook.
The change in rating is based on the premise that the market had previously underestimated Henkel's potential for margin recovery. However, recent developments in the company's Consumer Business sector, which had been expected to start showing significant improvements, have led to a shift in focus towards sales growth rather than margin expansion.
Jefferies aligned with the consensus operating margin forecast of 14.5% for FY25, but expressed concerns about the company's longer-term margin targets, which could potentially impact its competitiveness. The firm suggests that aiming for a margin around 16% by approximately 2027 could result in high gross margins and pricing, but insufficient investment in advertising and promotion, similar to issues faced during 2017 and 2019.
The firm's analysis anticipates organic sales growth for the third quarter to fall short of expectations, coming in at 1.9% compared to the consensus estimate of 3.6%. For FY24, the forecast is also lower at 2.7% against a consensus of 3.4%. This has led to a 2% reduction in the forecasted earnings per share for FY25 and subsequently a 5% decrease in the price target.
With these adjustments, Jefferies estimates the total shareholder return at approximately 10% and recommends a Hold position on Henkel shares. The next report on the company's performance is expected on November 6, which may provide further insights into its sales growth trajectory.
In other recent news, Henkel AG & Co KGaA has been the subject of various analyst evaluations. Stifel has raised its price target for Henkel to EUR89.00 from the previous EUR86.00, maintaining a Hold rating. This adjustment comes as Stifel anticipates a positive shift in Henkel's earnings before interest and taxes (EBIT) for the fiscal years 2025-26, attributing this to improved margin assumptions.
Additionally, Berenberg has increased the price target for Henkel to EUR88 from EUR86, while Deutsche Bank (ETR:DBKGn) raised its price target from €75.00 to €77.00, both firms continue to hold a Hold rating on the stock.
Henkel reported a group-level organic sales growth of 2.9% for the first half of the year, with an adjusted EBIT margin of 14.9%. The Adhesive Technologies segment posted an organic sales growth of 2%, while the Consumer Brands division experienced a stronger growth of 4.3%.
Citi maintains a neutral stance on Henkel, with a stock price target of €72.00. The firm upgraded its margin forecast for Henkel for fiscal year 2024, predicting the company's overall margin to reach 13.2%. These are the recent developments for Henkel AG & Co KGaA.
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