Morgan Stanley Favors Danone Over Nestlé Amid Shift Toward Defensive Stocks
Morgan Stanley is tilting its preference toward Danone over Nestlé, citing shifting investor sentiment and valuation concerns as catalysts. The bank sees Danone as better positioned in the ongoing rotation into defensive consumer staples amid economic uncertainty and declining bond yields.
Analysts at Morgan Stanley upgraded Danone to “overweight” from “equal-weight,” citing stronger earnings momentum, improving volume trends, and more attractive valuation. By contrast, Nestlé was downgraded to “equal-weight” due to its relatively high valuation and slower growth outlook.
“Danone offers positive earnings revisions on low expectations,” analysts noted, highlighting a rebound in the company’s yogurt and plant-based categories as well as cost-efficiency improvements under CEO Antoine de Saint-Affrique’s transformation strategy.
Danone shares have climbed nearly 5% in the past month, slightly ahead of Nestlé, which remains up year-to-date but is trading at a premium. Morgan Stanley pointed to Nestlé’s weaker pricing power and lower volumes, particularly in the U.S., which may hinder near-term performance.
The bank expects defensive consumer staples, including food and beverage giants, to outperform cyclicals as markets grapple with macroeconomic headwinds. Easing inflation, potential rate cuts by central banks, and lower bond yields are prompting a rotation into sectors perceived as more stable and resilient.
This view aligns with a broader investor trend favoring quality and value in the European FMCG space. Morgan Stanley’s stance suggests that companies with credible turnaround stories, pricing discipline, and emerging market exposure could offer attractive upside.
FMCG players will be closely watching this reallocation, with potential implications for capital flows, brand positioning, and strategic planning. As investor priorities shift, companies emphasizing operational efficiency and innovation in core categories may find themselves better placed to capture both market share and investor confidence.