EUR 850.00 For Business Accounts Only

Morningstar | Beiersdorf Outperforms Again in 1Q but Growth Appears Priced In

Narrow-moat Beiersdorf reported strong sales growth in the first quarter, beating our estimates across most regions in the consumer business. After raising our near-term growth estimates slightly to account for this beat, our full-year estimates are at the top end of management's guidance. This has no impact on our EUR 86 fair value estimate. Beiersdorf's stock has been somewhat volatile in recent months, and we currently think the growth opportunity, clearly evident in these sales figures, is fully priced into the market valuation.

First-quarter organic growth of 6.8% in the consumer business was impressive not only because it is at the top end of large cap global consumer staples growth, but also because of the consistency of growth across geographies. The standout region was Africa/Asia/Australia, which achieved 10.6% organic growth in the consumer business and 9.6% growth in the tesa segment. While this region contains several emerging markets, where per capita consumption of consumer products is growing, Beiersdorf also commented on strong performances in mature markets such as Japan, which implies significant market share gains during the quarter. We attribute this not only to strong execution, but also to the whitespace opportunities that remain for Beiersdorf in many markets. We forecast 4.7% organic growth for the full year in the consumer business, at the high end of management's 3%-5% guidance, which may be conservative given the strong start to the year. The critical question for valuation, however, is how long Beiersdorf can continue to outperform. As whitespace is filled in, we believe growth will quickly revert to category norms, with very limited price/mix and with anemic volume growth outside of emerging markets. Our normalized organic growth rate assumption is 3%.