Numbers were a decent beat last week.

However the stock hasn’t pushed on. Similar reaction today in BEIERSDORF post a good set of numbers.

I think the sector is topping out,however the thesis for this trade was a trading bear into April numbers and it hasn’t played out as we assumed.

We step aside. +0.39%



A trading bear into April. The stock has rallied 20% since KHC bid, and even after the margin guidance upgrade has re-rated by a mid-teens percentage. The bull case has been rolled out across the street, such that despite what is likely to be a dreadful Q1 (JPM out with 1.5% organic estimate today), there is only one bear left on the street.

True, the starting point was probably a little low, but that is reflective of how poor trading has been. Were the incremental cost saves the market were looking for easy to extract, they would have been done, and Polman now faces a fine balance of pulling out costs without sacrificing top line.

At these levels we think the stock prices in a spreads disposal, perhaps an additional 20bps of cost saves on top of the already upgraded guidance, and a commitment to buy back stock.

What we are not pricing is a transformational deal (Colgate), but that we are unlikely to hear anything about that in April, and in anycase would require a tricky combination of debt/equity/disposals to pull off in an incrementally positive manner.

The recent press suggests that Polman has been trying to persuade top shareholders that radical action isnt necessary. If that is what we end up with, the 1.5% Q1 print isn’t likely to inspire. TRADING SELL