On Thursday, Citi updated its outlook on Carlsberg (CSE:CARLb) (CARLB:DC) (OTC: CABGY (OTC:CABGY)), raising the share price target to DKK1,075 from DKK1,050, while reiterating a Buy rating for the stock.
The firm anticipates a strong first quarter for the brewer, with a return to volume growth, particularly citing a solid performance in China and favorable comparisons in Central and Eastern Europe & India. The firm expects the group's organic sales growth (OSG) to be up by 5.1%.
According to the analysis, Carlsberg's stock has shown one of the best performances in the Staples sector year-to-date. The shares are currently valued at a calendar year 2024 earnings (CY24E) price-to-earnings ratio (PE) of 17.2 times, which is below the average of 21.2 times for the sector excluding tobacco. This valuation comes despite the positive developments expected in the upcoming quarters.
The firm highlighted that the easier volume comparisons anticipated in the second and third quarters, combined with the approach of a new CEO who is focused on setting conservative targets to exceed expectations, present a favorable scenario for Carlsberg. Moreover, there is potential for reduced cost of goods sold per hectoliter (COGS-per-hl) to enhance profit margins.
Citi has also initiated a Positive Catalyst Watch on Carlsberg, signaling its optimism about the company's performance prospects in the near future. This move reflects the firm's confidence that the upcoming quarterly report and subsequent developments could act as positive catalysts for the stock's value.
InvestingPro Insights
As Citi forecasts a robust first quarter for Carlsberg with potential volume growth and a promising outlook for the year, investors looking for real-time data and additional insights can turn to InvestingPro for further analysis. Carlsberg has been a prominent player in the Beverages industry, and it has consistently rewarded its shareholders, raising its dividend for 7 consecutive years and maintaining dividend payments for 24 consecutive years. These InvestingPro Tips highlight the company's commitment to shareholder returns, which is a key consideration for income-focused investors.
At present, Carlsberg boasts a market capitalization of $21.62 billion and trades at an adjusted P/E ratio of 18.96, reflecting its earnings performance over the last twelve months as of Q4 2023. The company's revenue growth during this period was 4.72%, with a gross profit margin of 44.62%, indicating solid profitability. Additionally, despite trading at a high Price/Book multiple of 5.64, analysts predict Carlsberg will be profitable this year, a sentiment backed by the company's positive performance over the last twelve months.
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