On Friday, Redburn-Atlantic shifted its stance on Unilever plc (LON:ULVR:LN) (NYSE: UL), raising the stock from Neutral to Buy and setting a price target of GBP51.00. The firm's decision reflects a positive outlook on the company's financial performance, with an anticipated 20% potential upside from its current share price.
The upgrade is based on a discounted cash flow (DCF) analysis, which now incorporates a terminal growth rate of 3%, consistent with peers like Procter & Gamble and Colgate. Redburn-Atlantic has applied a weighted average cost of capital (WACC) of 7.4% to arrive at the new price target. The firm's forecasts include a 5.5% organic sales compound annual growth rate (CAGR), a target EBIT margin of 21.2%, and a ten-year earnings per share (EPS) CAGR of 11.5%.
The analyst's valuation of Unilever also takes into account a forward price-to-earnings (P/E) and enterprise value to EBIT (EV/EBIT) multiple of 20.9x and 17.4x, respectively. This valuation includes €26.4 billion of minority interests, predominantly Unilever's 61.9% holding in Hindustan Unilever, contributing significantly to the company's value.
Unilever's upgraded status and new price target by Redburn-Atlantic indicate a robust financial model and promising growth prospects for the company, as observed by the analysis firm. The stock's potential ascent to the GBP51.00 mark is based on a comprehensive evaluation of its sales growth, profit margins, and earnings potential, alongside its strategic investments.
In other recent news, Unilever has surpassed sales growth expectations in Q1, reporting a 4.4% increase in sales and a 2.2% increase in sales volumes. The company also implemented a 2.2% price hike during the quarter. As part of its strategic initiatives, Unilever has announced plans to spin off its ice cream division and implement a cost-saving initiative aimed at reducing expenses by approximately €800 million over the next three years. This will result in a reduction of about 7,500 jobs globally.
JPMorgan (NYSE:JPM) has upgraded Unilever stock from Underweight to Overweight and increased the price target to £51.00, reflecting a belief in the company's ongoing transformation and its potential for future growth. The firm's analysis highlighted Unilever's volume recovery in Europe, Nutrition, and Ice Cream segments, and forecasted a stronger financial year in 2024.
Additionally, Argus has raised the stock price target for Unilever to $60, anticipating benefits from new products, increased presence in emerging markets, and continuous efforts to enhance productivity.
Jefferies has also updated its outlook on Unilever, raising the price target to £37.00 and maintaining an Underperform rating on the stock. The firm has raised its forecast for Unilever's full-year 2024 organic sales growth estimate to 3.9%, up from 3.3%.
These are among the recent developments that are shaping the prospects of Unilever.
InvestingPro Insights
Following Redburn-Atlantic's optimistic outlook on Unilever, data from InvestingPro further enriches the narrative of the company's financial health and investment potential. With a market capitalization of $140.24 billion and a P/E ratio standing at 17.6, Unilever's valuation is competitive within the Personal Care Products industry. Notably, the company has demonstrated resilience through its consistent dividend payments over the past 33 years, showcasing a reliable return to shareholders. The current dividend yield stands at a compelling 3.22%, with a notable dividend growth of 8.29% over the last twelve months as of Q1 2023.
InvestingPro Tips highlight Unilever's status as a prominent player in its sector and its strong return over the last three months, with a price total return of 15.37%. Additionally, the company's stock is trading near its 52-week high, at 99.73% of the peak value, reflecting investor confidence and market momentum. For those looking to delve deeper into Unilever's financials and performance metrics, InvestingPro offers additional tips and insights. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of data that can inform investment decisions.
Investors considering Unilever will find the InvestingPro platform a valuable resource for real-time data and expert analysis. With the next earnings date set for July 25, 2024, and analysts predicting profitability this year, Unilever presents a compelling case for consideration in investment portfolios.
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