Morningstar

JDE Peet’s Earnings: Europe Continues To Disappoint; Profit Guidance Downgraded

""
Securities In This Article
JDE Peets NV Ordinary Shares
(JDEP)

JDE Peet’s JDEP reported first-half fiscal 2023 results with 3.5% group organic growth, slightly below company-compiled consensus of 3.8%. Within this, organic growth in Europe, the group’s most profitable segment, was the negative surprise of 0.3% versus 2% for consensus, while Larmea and JDE Peet’s came in higher than expectations at 10% and 8.6% respectively, partially offsetting underperformance in Europe. Adjusted EBIT was down 7.9% (including foreign-exchange and scope-change effects) slightly better than the negative 9.3% anticipated by consensus. Management confirmed top-line guidance for fiscal 2023 with organic sales growth at the high end of its medium-term range of 3%-5%, but downgraded organic adjusted EBIT growth to the following range: a low-single-digit or low-single-digit decline to an increase (from low-single-digit growth before) compared with 4.6% organic growth and negative 2% EBIT growth in our updated model. From a regional perspective, Europe’s underperformance was driven by continued weakness in volumes/mix down 8.6% versus down 12.7% in second-half 2022. This was a result of the lasting effects of second-half 2022 delistings in Europe including Germany, France, and the U.K. during price negotiations (the firm aggressively hiked prices ahead of peers). The firm now believes it will take more time to rebuild lost distribution, but expects products to be back on the shelves at the end of second-quarter 2023. JDE Peet’s is currently discontinuing international brands in the Russian market due to the war in Ukraine. Rebranding the Jacobs brand in Russia resulted in an impairment of EUR 185 million in first-half 2023.

Given lower bottom-line guidance and continued weakness in Europe, we reduce our fair value estimate for JDE Peet’s to EUR 30.50 from EUR 32.50, largely reflecting lower 2023 adjusted EBIT growth (negative 2% at the low end of guidance, from 4% growth before).

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

Our Top Pick for Investing in US Renewable Energy

Utility-scale solar and battery storage installations are poised to set records in 2024.
Brett Castelli

How to Measure a Stock’s Uncertainty

Morningstar’s Uncertainty Rating helps investors understand the risks associated with an investment and how that may influence a decision to buy.
Emelia Fredlick

How to Determine Whether a Stock Is Cheap, Expensive, or Fairly Valued

The Morningstar Rating for stocks gauges how a stock’s price compares with what our analysts think it’s worth.
Emelia Fredlick

About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
More from Author

Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar*. He covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

Sponsor Center