reports
- Ioannis Pontikis
Danone Reports Broadly in Line 2Q Results, Maintains Guidance; Shares ...
Danone reported second-quarter 2019 results with like-for-like sales up 2.5%, broadly in line with our estimates. Growth was driven by price and mix (up 3.5%), which more than offset negative volume growth of 1.0%. The recurring operating margin was up 42 basis points at 14.7%. Management reaffirmed fiscal 2019 guidance of about 3% like-for-like growth and more than 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Management also expects further cost inflation p...
- Ioannis Pontikis
Morningstar | Danone's Narrow Moat Should Facilitate the Achievement o...
Danone's advantaged exposure in categories (yogurt, plant-based products, specialised nutrition, water) that are in sync with the latest consumer trends (health and wellness) gives it a head start on many of its peers that are still striving to optimise their brand portfolio. Given its entrenched supply chain position, pricing power in specialised nutrition (29% of sales), and a durable cost edge, we believe the firm is poised to meet changing consumer demands while generating healthy returns. T...
- Ioannis Pontikis
Danone's Narrow Moat Should Facilitate the Achievement of its Midterm ...
Danone reported first-quarter 2019 results with like-for-like sales up 0.8%, broadly in line with our estimates. Growth was driven by price and mix (up 3%), which more than offset negative volume growth of 2.2%. Management reaffirmed fiscal 2019 guidance of around 3% like-for-like growth and above 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Given this broadly in line set of results, we maintain our EUR 70 fair value estimate and narrow moat rating. On a mo...
- Ioannis Pontikis
Morningstar | Danone Reports Broadly in Line First-Quarter Results, Ma...
Danone reported first-quarter 2019 results with like-for-like sales up 0.8%, broadly in line with our estimates. Growth was driven by price and mix (up 3%), which more than offset negative volume growth of 2.2%. Management reaffirmed fiscal 2019 guidance of around 3% like-for-like growth and above 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Given this broadly in line set of results, we maintain our EUR 70 fair value estimate and narrow moat rating. On a mo...
- Ioannis Pontikis
Danone Reports Broadly in Line First-Quarter Results, Maintains Guidan...
Danone reported first-quarter 2019 results with like-for-like sales up 0.8%, broadly in line with our estimates. Growth was driven by price and mix (up 3%), which more than offset negative volume growth of 2.2%. Management reaffirmed fiscal 2019 guidance of around 3% like-for-like growth and above 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Given this broadly in line set of results, we maintain our EUR 70 fair value estimate and narrow moat rating. On a mo...
- Ioannis Pontikis
Morningstar | Narrow-Moat Danone Reports Broadly In-Line 2018 Results,...
Danone reported full-year 2018 results with like-for-like sales up 2.9% and 2.4% for the 12 months and fourth quarter, respectively, in line with our estimates. Recurring operating margin improved 50 basis points (versus 70 basis points in our model). Management issued fiscal 2019 guidance of around 3% like-for-like growth and above 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Given this broadly in-line set of results, we maintain our EUR 70 fair value es...
- Ioannis Pontikis
Narrow-Moat Danone Reports Broadly In-Line 2018 Results, Updates Guida...
Danone reported full-year 2018 results with like-for-like sales up 2.9% and 2.4% for the 12 months and fourth quarter, respectively, in line with our estimates. Recurring operating margin improved 50 basis points (versus 70 basis points in our model). Management issued fiscal 2019 guidance of around 3% like-for-like growth and above 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Given this broadly in-line set of results, we maintain our EUR 70 fair value es...
- Ioannis Pontikis
Morningstar | A Strong Nutrition Franchise and Entrenched Supply Chain...
After revisiting our estimates and accounting for Danone’s recent investor day, we are trimming our fair value estimate to EUR 70 per share ($16.30 per ADR) from EUR 71 ($17.50 per ADR), which implies 2019 multiples of 18.6 times earnings, around 12 times enterprise value/EBITDA, a free cash flow yield of 5%, and a dividend yield of 2.6%. These multiples are roughly in line with Danone's trading range over the past decade and slightly below our valuation of most large-cap competitors, due to D...
- Ioannis Pontikis
Morningstar | A Strong Nutrition Franchise and Entrenched Supply Chain...
After revisiting our estimates and accounting for Danone’s recent investor day, we are trimming our fair value estimate to EUR 70 per share ($16.30 per ADR) from EUR 71 ($17.50 per ADR), which implies 2019 multiples of 18.6 times earnings, around 12 times enterprise value/EBITDA, a free cash flow yield of 5%, and a dividend yield of 2.6%. These multiples are roughly in line with Danone's trading range over the past decade and slightly below our valuation of most large-cap competitors, due to D...
- Ioannis Pontikis
A Strong Nutrition Franchise and Entrenched Supply Chain Position Supp...
After revisiting our estimates and accounting for Danone’s recent investor day, we are trimming our fair value estimate to EUR 70 per share ($16.30 per ADR) from EUR 71 ($17.50 per ADR), which implies 2019 multiples of 18.6 times earnings, around 12 times enterprise value/EBITDA, a free cash flow yield of 5%, and a dividend yield of 2.6%. These multiples are roughly in line with Danone's trading range over the past decade and slightly below our valuation of most large-cap competitors, due to D...
- Ioannis Pontikis
A Strong Nutrition Franchise and Entrenched Supply Chain Position Supp...
On Oct. 22, Danone hosted an investor seminar day at its London offices, at which it reiterated its 2020 objectives (introduced in 2017), including 4%-5% organic sales growth and operating margins higher than 16%, while delaying its 12% return on invested capital target to 2022 (from 2020). Given that the event was largely in line with our expectations, we do not expect a material change to our EUR 71 per share ($17.50 per ADR) fair value estimate and we maintain our narrow moat rating. We bel...
- Philip Gorham
Morningstar | Danone's Capital Markets Day Finds Us Cautiously Optimis...
On Oct. 22, Danone hosted an investor seminar day at its London offices, at which it reiterated its 2020 objectives (introduced in 2017), including 4%-5% organic sales growth and operating margins higher than 16%, while delaying its 12% return on invested capital target to 2022 (from 2020). Given that the event was largely in line with our expectations, we do not expect a material change to our EUR 71 per share ($17.50 per ADR) fair value estimate and we maintain our narrow moat rating. We bel...
- Philip Gorham
Danone's Capital Markets Day Finds Us Cautiously Optimistic; Shares At...
On Oct. 22, Danone hosted an investor seminar day at its London offices, at which it reiterated its 2020 objectives (introduced in 2017), including 4%-5% organic sales growth and operating margins higher than 16%, while delaying its 12% return on invested capital target to 2022 (from 2020). Given that the event was largely in line with our expectations, we do not expect a material change to our EUR 71 per share ($17.50 per ADR) fair value estimate and we maintain our narrow moat rating. We bel...
- Philip Gorham
Morningstar | In-Line 3Q Sales for Danone as Water and EDP Counter Nut...
Danone reported third-quarter sales with like-for-like sales growth up 3.1% and 1.4% for the first nine months and third quarter, respectively, broadly in line with our estimates. Management reaffirmed fiscal 2018 guidance of double-digit recurring EPS growth at constant exchange rates. Although we maintain our EUR 71 fair value estimate for now, we intend to take a fresh look at our underlying assumptions after the company's investor day, which will take place on Oct. 22. On a more granular v...
- Philip Gorham
In-Line 3Q Sales for Danone as Water and EDP Counter Nutrition Slowdow...
Danone reported third-quarter sales with like-for-like sales growth up 3.1% and 1.4% for the first nine months and third quarter, respectively, broadly in line with our estimates. Management reaffirmed fiscal 2018 guidance of double-digit recurring EPS growth at constant exchange rates. Although we maintain our EUR 71 fair value estimate for now, we intend to take a fresh look at our underlying assumptions after the company's investor day, which will take place on Oct. 22. On a more granular vi...
- Philip Gorham
Morningstar | Weakness in Dairy Takes the Gloss Off Another Strong Per...
Our second-quarter revenue estimates proved too optimistic for Danone, as weakness in the international dairy business and unfavourable currency weighed on the firm's performance. On the other hand, the baby food business was again very strong. We reiterate our EUR 71 fair value estimate and narrow economic moat rating, and we think there is limited upside to Danone from these levels. Danone's second-quarter organic growth rate of 3.3% is a sequential slowdown from the 4.9% posted in a particul...
- Philip Gorham
Weakness in Dairy Takes the Gloss Off Another Strong Performance in Fo...
Our second-quarter revenue estimates proved too optimistic for Danone, as weakness in the international dairy business and unfavourable currency weighed on the firm's performance. On the other hand, the baby food business was again very strong. We reiterate our EUR 71 fair value estimate and narrow economic moat rating, and we think there is limited upside to Danone from these levels. Danone's second-quarter organic growth rate of 3.3% is a sequential slowdown from the 4.9% posted in a particula...
- Philip Gorham
- CFA
- FRM
Thesis Plays Out as China Formula Drives Solid 3Q for Danone; Shares R...
Danone's third-quarter sales update showed that our thesis of a turnaround in financial performance led by the infant formula business in China is clearly playing out. We are reiterating our EUR 71 fair value estimate and narrow moat rating, which was evident in the strong performance in the nutrition business this quarter. After the significant rerating of the stock this year, and with the stock now trading at our fair value estimate, we no longer regard Danone as one of the most compelling opp...
- Philip Gorham
- CFA
- FRM
Adding Wide-Moat Imperial Brands to Best Ideas as Market Overlooks Com...
We are adding wide-moat Imperial Brands to our Best Ideas list because we think the valuation multiple discount to competitors has become too large to ignore. Investors are quite rightly focused on the emergence of heated tobacco, but are underestimating the power of Imperial's wide economic moat, as its competitive advantages of brand equity and in the supply chain should allow it to enter the heated tobacco category if it takes off in core geographies. We are also removing Danone from the list...
- Philip Gorham
- CFA
- FRM
We continue to like Danone's margin-expansion opportunity.
Organic sales growth remained very weak in the second quarter, but on the all-important margin expansion story, Danone delivered excellent results. We reiterate our EUR 71 fair value estimate for the shares, along with our narrow moat rating. Pricing power was evident in Danone's most advantaged categories, infant formula and medical nutrition, while in water and dairy and plant-based products, pricing remained sluggish. We are still bullish on the stock, although less upside now remains. The si...
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