Unilever is continuing to respond to the fright it received last year when it was the target of an unsuccessful hostile cash-and-stock bid from Kraft-Heinz. This equated to around $50 a share, or £40.21 given prevailing exchange rates at the time.
This values Unilever shares at about £35.13 in today’s world of GBP/USD, where the GBP has been gradually appreciating on solid post-Brexit vote economic news.
Unilever results: can company hit its growth targets?
Unilever CEO Paul Polman has been overseeing the sale of the spreads operation for more than €7 billion, a €5 billion share buyback, a renewed cost cutting drive, a plan to re-domicile the corporate HQ in the Netherlands and a drive towards Unilever’s new financial goals under its Connected 4 Growth strategy. Among these objectives is 3% to 5% underlying sales growth per year and a 20% operating margin by 2020.
Unilever results are out for the first quarter on 19 April, has been struggling to make its sales growth targets in 2017, although underlying sales growth did accelerate to 4% in Q4. Volumes rose to 3.2%, which is the best figure since Q3 2015, and prices rose 0.7% (the worst figure in at least six years). Analysts are wondering whether Unilever has stopped pushing prices to drive volume.
For Q1 2018 Unilever results analysts are looking for sales of €12.8 billion (versus €13.3 billion a year ago). That equates to underlying sales growth of 3.4% (2.5% volume, 0.8% price). Unilever results do not include provide profit numbers in Q1 but for the full year analysts will be looking for an operating profit of €9.45 billion, for an 18% margin and a 7% year-on-year increase. Earnings per share (EPS) are forecast to rise 4.3% to €2.34.
The Unilever share price has been cautiously bullish over the last 30 days, trading up from 3787 and hitting a peak of 4030 on 5 April. The market in Unilever shares now seems to be sitting on its hands waiting for the results to come out tomorrow.
Unilever shares get a boost from UBS upgrade
There is other positive news out there for Unilever shares: UBS upgraded Unilever stock to a buy at the end of last month. UBS recognised that Unilever shares had pulled back from a high in October but said it expected to see some benefits from a program of restructuring. This includes the division of Unilever into three areas – Beauty & Person, Home Care, and Food & Refreshments.
“Although the share price has lost some of its earlier mojo, successfully executing the new plan and maintaining its track record for superior cash flow should ultimately keep Unilever shareholders happy in the long term,” says Russ Mould, investment director with AJ Bell.