On Thursday, Deutsche Bank (ETR:DBKGn) reaffirmed its Buy rating on Carlsberg (CSE:CARLb) A/S (CARLB:DC) (OTC: CABGY (OTC:CABGY)), with an unchanged price target of DKK1,100.00. The endorsement comes as the brewing company is set to release its first-half 2024 financial results on August 14. The bank's analysts project organic volume growth of 1.7% for the second quarter, alongside a 5.0% increase in organic revenue, attributing 3.2% of this growth to favorable pricing and product mix.
For the first half of 2024, Deutsche Bank expects Carlsberg to report a 7.2% rise in organic operating profit, with an adjusted operating profit of DKK 6,513 million and an adjusted net profit of DKK 4,054 million. These forecasts hinge on the assumption of typical weather conditions during the peak summer months in the company's key markets.
The bank also anticipates that Carlsberg may revise its full-year 2024 organic operating profit growth guidance upward, from the current forecast of 1-5% to a range of 5-9%. This estimate surpasses the Bloomberg consensus of 7.2%, with Deutsche Bank's own expectations even more optimistic at 9.6%. However, this optimistic outlook is predicated on the premise of normal weather patterns through early August.
In other recent news, Citi has updated its outlook on Carlsberg, raising the share price target to DKK1,075 from DKK1,050, and maintaining a Buy rating for the stock. The firm anticipates a robust first quarter for the brewer, expecting a return to volume growth, particularly citing strong performance in China and favorable comparisons in Central and Eastern Europe & India. It projects the group's organic sales growth (OSG) to increase by 5.1%.
According to Citi's analysis, Carlsberg's stock has demonstrated 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 sector average of 21.2 times, excluding tobacco. This valuation persists despite the positive developments anticipated in the coming quarters.
Citi also highlighted the easier volume comparisons expected in the second and third quarters, along with the approach of a new CEO focused on setting conservative targets to exceed expectations. This presents a favorable scenario for Carlsberg. Additionally, the potential for reduced cost of goods sold per hectoliter (COGS-per-hl) could enhance profit margins.
InvestingPro Insights
As Carlsberg A/S (OTC: CABGY) approaches its first-half 2024 financial results release, current data from InvestingPro shows a company that has been a consistent performer in the beverages industry. With a market capitalization of $21.14 billion and a solid gross profit margin of 44.62% over the last twelve months as of Q4 2023, Carlsberg's financial stability is apparent. The company's ability to maintain dividend payments over 24 consecutive years, with a recent growth of 11.35% in dividends, aligns with Deutsche Bank's positive outlook.
InvestingPro Tips indicate that Carlsberg is not only a prominent player in its industry but also has effectively managed its cash flows to cover interest payments comfortably. While the company operates with a moderate level of debt, its dividend yield stands at a healthy 1.95%, reflecting its commitment to shareholder returns. Moreover, analysts predict profitability for the current year, which supports the bank's projection of an upward revision in Carlsberg's organic operating profit growth guidance.
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