Key Facts: Nestlé’s stock jumped about 8% on Oct. 16 – its steepest one-day gain since 2008 [1] [2]. That followed a surprise 4.3% rise in Q3 organic sales (versus ~3.7% expected) [3], with its volume metric (real internal growth) at +1.5% (far above the +0.3% forecast) [4]. New CEO Philipp Navratil announced a costly “turnaround” plan: 16,000 job cuts (roughly 6% of the global workforce) over two years [5] [6] and an increased cost-savings goal of CHF 3.0 billion by 2027 [7] [8]. Navratil said “the world is changing, and Nestlé needs to change faster,” warning that “hard but necessary” job cuts are coming [9]. Analysts cheered the news – Vontobel’s Jean-Philippe Bertschy said the results “should partly restore investors’ trust,” while Bernstein called the earnings “fuel to the turnaround fire” [10] [11]. Many analysts have raised their Nestlé price targets (the average 12-month target is now ~CHF 87, and RBC Capital maintains ~CHF 93) [12]. Nestlé reaffirmed its 2025 guidance (organic growth improving, margin ≥16%) [13], but warned that a strong Swiss franc and new U.S. tariffs could “dampen” profits [14].
Surprising Q3 Sales Rebound
Nestlé reported a better-than-expected quarter on all fronts. Organic (currency-adjusted) sales grew ~4.3% in Q3, above analyst forecasts of ~3.7% [15]. The growth was led by higher prices and strong demand in key categories like coffee and confectionery [16] [17]. Importantly, Nestlé’s real internal growth (RIG) – a key volume measure – rebounded to +1.5%, well above the +0.3% expected [18]. Volumes in North America and Europe firmed up, although Greater China remained a drag (Nestlé says it will refocus on building demand there) [19] [20]. The solid results reflect Nestlé’s effort to invest behind brands and innovation: as CEO Navratil noted, the company is “stepping up investment… and the results are starting to come through” [21] [22]. CFO Anna Manz admitted Nestlé had “over-invested in distribution” in China and is correcting course to drive local demand [23]. On the earnings call, Nestlé reiterated that it still expects 2025 organic growth to improve versus 2024 and an operating margin at or above ~16% [24] [25].
Bold Job-Cut Plan and Strategy Shift
Just weeks into his tenure (he was appointed in early September), CEO Philipp Navratil unveiled one of the most aggressive cost-cutting plans in Nestlé’s history. The company will slash 16,000 jobs globally by 2027 – about 6% of its ~277,000 workforce [26] [27]. Roughly 12,000 of those cuts will be white-collar roles, with the remaining 4,000 in manufacturing and supply-chain functions [28]. This accelerates Navratil’s predecessor’s efficiency program: Nestlé is raising its total cost-saving goal to CHF 3.0 billion by end-2027 (up from CHF 2.5 billion) [29] [30].
Navratil framed the cuts as part of a turnaround push. “The world is changing and Nestlé needs to change faster,” he said, noting that the moves were “hard but necessary decisions” [31]. He vowed to build a lean, performance-driven culture: “We are fostering a culture that embraces a performance mindset that does not accept losing market share,” he said, adding that the company will be “ruthless in assessing our people” to see who delivers results [32] [33]. Analysts at RBC Capital Markets applauded this tone – James Edwardes-Jones said he “welcomed Navratil’s ambition to foster a culture…where losing market share is not accepted” [34]. Nestlé also signaled it will review underperforming businesses (for example, exploring strategic options for its bottled water and vitamin divisions) as part of this push [35] [36].
Stock Market Rally and Outlook
News of the sales beat and job cuts sent Nestlé’s shares sharply higher. The stock surged as much as 8.2% in Swiss trading on Oct. 16 – its largest one-day jump since 2008 [37] [38]. By the end of Thursday, the Swiss-market (SMI) stock was near CHF 82.10, up from around CHF 75 the previous close [39] [40]. This rally lifted Switzerland’s market index and underscored investor relief that Nestlé might finally arrest a years-long slide in growth.
Looking ahead, analysts are now more optimistic on Nestlé’s stock. TipRanks shows the average 12-month Nestlé target at ~CHF 87.13 (roughly 20% above recent prices), and even before the rally, RBC Capital was modeling a CHF 93 target [41]. Those price targets assume mid-single-digit organic growth (around 3–4%) and stable margins (around 16–17%) in 2025 [42]. Nestlé’s management reaffirmed that 2025 guidance after the quarter, saying it still expects organic growth to pick up and underlying margin to be ~16% or higher [43]. The company also highlighted its strong free cash flow conversion (nearly 90%) and a dividend yield around 2.7%, making it attractive to defensive investors.
However, Nestlé cautioned that headwinds remain. The Swiss franc has been unusually strong, and new U.S. tariffs on Swiss goods (now at 39% on some imports) will bite into profit in 2026–27 [44] [45]. Rising input costs (in commodities like milk and palm oil) are another threat: Nestlé warned that inflationary pressures could “dampen” profits [46]. In its sector, global consumer staples stocks have largely lagged growth sectors this year, so some analysts see Nestlé’s rebound as a positive sign of defensive stocks catching up [47].
Analyst and Expert Take
Experts gave the quarter high marks, but stressed that delivery is key. “These results should partly restore investors’ trust,” said Vontobel analyst Jean-Philippe Bertschy [48]. Bernstein Research called the surprise job cuts and sales beat “fuel to the turnaround fire,” noting the aggressive action is exactly what investors have been asking for [49]. RBC’s Edwardes-Jones said Navratil’s assertive stance was welcome, and importantly, the rebound in volumes (the +1.5% RIG) suggests the market is responding to Nestlé’s investments. The Guardian quoted Navratil promising to invest boldly: “We will be bolder in investing at scale and driving innovation… we are fostering a culture… where winning is rewarded” [50].
Still, some analysts urge caution. Nestlé’s Q4 commentary will be closely watched to see if momentum continues. Even with raised targets, Wall Street consensus still generally rates Nestlé as a “hold” (indicating mixed views on upside) [51]. Market-watchers will compare Nestlé’s performance to peers (like Unilever or Coca-Cola) in the staples sector. For now, the message is that Nestlé has its board’s commitment to a leaner structure and is starting to see green shoots in growth – and its stock rally suggests investors are cautiously betting on a sustainable turnaround [52] [53].
Sources: Nestlé Q3 earnings release and comments, Swissinfo/Reuters/Bloomberg news reports [54] [55]; analyst research (Vontobel, RBC, Bernstein) as reported by Reuters/Swissinfo [56] [57]; TS2.tech market analysis [58]; financial media (The Guardian) [59]; and LSEG/FT equity data [60].
References
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