JDE Peet's Earnings: Strong Results and Upgraded Fiscal 2024 Guidance

Narrow-moat JDE Peet's reported first-half fiscal 2024 results with 3.6% group organic growth, which was above company-compiled consensus of 2%. Organic growth in Europe, the group's most profitable segment, was up 1% with volume/mix of 1.4% and negative 0.4% in price, while its CPG Latin America, Russia, Middle East, and Africa segment and Peet's performed well with organic sales growth up 11.8% and 4.3%, respectively, and positive volume/mix. On the other hand, Asia-Pacific organic sales growth of 0.8% was driven by price, up 4.4%, with volume/mix declines dragging performance. Adjusted EBIT increased by 17.5% to EUR 692 million due primarily to a 9.0% organic increase in adjusted gross profit, including a one-off EUR 16 million insurance payout related to a warehouse issue that hit performance at Peet's in first-half 2023 and cost controls. Given this solid first-half performance, management upgraded guidance for fiscal 2024. Organic sales growth is now expected at the higher end of its medium-term range of 3%-5% versus the lower end before and 3.6% in our model, with organic adjusted EBIT growth at 10% versus a midsingle digit before and 5% growth in our model, and free cash flow of at least EUR 850 million versus above the level of fiscal 2023 (EUR 523 million in fiscal 2022) before. We don't expect to materially change our EUR 27 per-share fair value estimate for JDE Peet's. Shares trade in 5-star territory.