Nestle has announced increased share buybacks to reward shareholders for their faith in the stock. After activist investor Dan Loeb pressured the food giant, the company responded with steps to improve its performance.
Last week we wrote to you about Nestle being one of the most conservative stocks in the world. Now management is focusing on making the stock even more attractive for shareholders.
Saabira Chaudhuri reports on Nestle’s announcement in the WSJ:
Nestlé SA on Tuesday introduced a profit-margin target and said it would accelerate share buybacks amid pressure from activist investor Dan Loeb, while remaining firm on retaining a stake in cosmetics giant L’Oréal SA.
The consumer-goods company’s strategy has been in the spotlight since Mr. Loeb’s Third Point LLC hedge fund built a 1.3% stake in Nestlé and in June advocated steps to improve its performance, including the sale of its stake in L’Oréal and the setting of a margin target.
Nestlé on Tuesday said it would strive for a trading operating profit margin of 17.5% to 18.5% by 2020 on an “underlying” basis, which among other things strips out one-time charges. Its margin in the first half was 15.8%.
The company also plans to tweak the $20.8 billion share-buyback program it announced in June. It will now purchase shares evenly in each of the three years to 2020, rather than back load them in 2019 and 2020.
Read more here.
Jeremy Jones, CFA
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