Keep Nestle on Your Radar Screen

Erin Lash: Nestle's first-quarter trading update really supported the strength we view of the business, both its strong portfolio and its low-cost, expansive global sales and distribution network.

While unfavorable foreign currency rates hampered reported sales, underlying sales growth was more positive at about 4%, which was balanced between both volume and price, which we view positively. Strength in emerging markets, which were up more than 8%, offset more muted growth in developed markets, which grew sales at less than 1%. Despite this, we think the firm's focus on innovation and bringing new products to market that resonate with consumers is what is really going to drive the business going forward.

In addition, we expect that the company will continue to look to divest underperforming brands to focus its resources, both financial- as well as personnel-related, on its highest-return opportunities, again another positive for the long-term competitive advantages of the business.

Overall, the shares are trading right around our fair value estimate, but we think Nestle provides investors a good proxy for the overall consumer products base and should remain on investors' radars over the long term.