Beiersdorf Q3 Sales in Line With Expectations, but Margins Look Set to Disappoint in Second Half

Narrow-moat Beiersdorf reported third-quarter sales figures very close to our estimates. Guidance for the rest of the year indicates that margins will be below the level of last year, and we think this is the trigger for the sell-off in the stock. We have lowered our gross margin estimate for the second half of the year by 150 basis points, and now expect a full-year margin of 57%. This has no impact on our EUR 89 fair value estimate or our narrow moat rating, however, as we expect margins to recover and make no changes to our medium-term assumptions. After the pullback, Beiersdorf trades only marginally above our fair value estimate.