The consumer goods company had a pretty excellent 2017, even if it did trail off towards the end of the year. Most of its juice came from the reports, and rejection, of a takeover bid from Kraft Heinz (NASDAQ:KHC) at the end of February, a deal that Unilever (LON:ULVR) claimed had ‘no merit, strategic or financial’. Yet the mere fact the US firm was interested, alongside Unilever’s confidence in its own worth, impressed investors, who put the stock on track to hit an all-time high of £45.52 by mid-October.
Since then, however, Unilever has gone off the boil a bit. The main reason for its recent decline was October’s third quarter update, with the results sending the stock 8.5% lower in the 48 hours that followed. While underlying sales still rose 2.6% to €13.2 billion, that was way off the 3.9% forecast by analysts, and short of the 3% growth posted across the first half of its financial year.
Bad weather blighted the quarter, from natural disasters in the USA and Mexico causing a week’s worth of lost sales in the key regions of Texas and Florida, to a sub-par European summer hurting the performance of the firm’s ice cream brands Magnum and Ben & Jerry’s. Still, its full year guidance remained unchanged, with underlying sales growth expected to come in between 3% to 5%, alongside a 100 basis points lift to its underlying operating margin.
It’ll be interesting to see how investors react to Thursday’s annual figures, given that analysts have underlying sales growth coming in at the wrong end of that aforementioned bracket at 3.7%. Any disappointment in that number might be tempered, however, if the company surpasses its own underlying operating margin estimates, with UBS arguing it could climb by a guidance-beating 115 basis points.
Unilever PLC has a consensus rating of ‘Hold’ alongside an average target price of £43.94.
Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved. In relation to fixed odds, Spreadex Ltd is licensed and regulated by the Gambling Commission under licence number.