Goldman Sachs: Henkel Rating Lowered to Sell from Neutral

By Scott Kanowsky

Investing.com -- Goldman Sachs has downgraded its guidance for Henkel AG & Co. KGaA (ETR:HNKG_p), citing caution in the outlook for the German consumer goods group's key adhesives business.

In a note, analysts at the bank said they expect weak industrial production and economic growth in Germany in the fourth quarter of this year and first half of 2023. They added that these trends are normally a "leading indicator" for a slowdown in the adhesive technologies unit at Henkel, which accounts for half of the company's total sales.

Goldman Sachs subsequently lowered its rating for Henkel's stock to "Sell" from "Neutral." It also slashed its projection for 2023 full-year earnings per share by 2.3% and indicated a price target of €62 from €67.

"In the scenario where a deeper recession occurs or gas supply issues impact Henkel's suppliers and clients, we could see further downside risk," the analysts wrote.

In August, Henkel warned that a recent surge in material costs weighed on its half-year operating profit despite a rise in sales. The maker of Persil and Loctite also backed its estimate for a decline of between 35% - 15% for adjusted earnings per share at constant exchange rates in its fiscal year 2022.

Goldman Sachs said it sees the figure coming in at the top end of that range, but flagged that "limited risks" remain to Henkel's annual results.