Strategic Update Showcases Coffee Strength for JDE Peet's With Preliminary Results, Guidance In line

JDE Peet's provided an update on its strategic roadmap and released preliminary fiscal 2022 results that included organic sales growth up 11.3%, behind company-compiled consensus (at 13%) but broadly in line with our full-year estimate (11.8% in our model) and adjusted EBIT lower 6% versus 4% lower in our model and 3% lower for consensus. Given that gross profit increased by 3.3%, SG&A was the main driver of the lower-than-expected EBIT number, which is encouraging (as the company continues to invest behind its brands). JDE Peet's will publish its fiscal 2022 financial statements on Feb. 22. Performance was largely in line (if not better) than guidance given earlier into the year ("double-digit" organic sales growth in fiscal 2022 but a "stable level of gross profit compared to last year" as well as free cash flow of over EUR 1 billion). Medium- to long-term targets of 3%-5% organic sales growth, mid-single-digit organic adjusted EBIT, and 70% cash conversion are unchanged. Management introduced fresh guidance for fiscal 2023 with organic sales growth at the high end of its medium-term range of 3%-5% and low-single-digit organic adjusted EBIT growth compared with 4% organic growth and 5% EBIT growth in our model. Therefore, we don't expect to materially alter our EUR 36.50 fair value estimate. JDE Peet's is one of our top picks in European consumer packaged goods, with the shares trading in 4-star territory.