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Unilever (NYSE: UL) stands as a titan in the consumer goods realm, boasting a portfolio of globally renowned brands such as Dove, Axe, Vaseline, Knorr, and Ben & Jerry’s. With its extensive array of popular products spanning the consumer staples sector, the company serves as a quintessential cornerstone in any investment portfolio.
The current market data for Unilever PLC (UL) :
| Metric | Value |
| Stock Ticker | UL |
| Exchange | New York Stock Exchange (NYSE) |
| Current Price (Close) | $46.76 (as of the last trading session) |
| After-Hours Price | $46.92 |
| Day’s Range | $46.75 – $47.45 |
| 52-Week Range | $46.16 – $55.99 |
| Market Cap | $119.756 billion |
| PE Ratio (TTM) | 17.00 |
| Earnings Per Share (TTM) | $2.75 |
| Forward Dividend & Yield | $1.86 (3.97%) |
| Ex-Dividend Date | February 22, 2024 |
| Estimated 1-Year Target Price | $46.00 |
(NYSE: UL) is a multinational consumer goods company recognized for its diverse range of brands encompassing personal care, food, and home care products.
Boasting a beta of 0.45, Unilever exhibits greater stability compared to the broader market. Despite being perceived as a secure investment choice, Unilever holds the potential to outperform the market in terms of total returns over the next decade.
Currently trading at a valuation not seen in years, with a notable 27% decline from its peak, Unilever presents an opportune moment for investors. Furthermore, it offers an attractive and secure dividend yield of 3.9%. Here’s why Unilever appears to be a compelling buy at present.
Unilever’s portfolio :
Powerful brands across its five business segments:
| Business Segment | Brands |
| Beauty and wellbeing | Dove hair and skin care, Sunsilk, TreSemmé, Clear hair care, Pond’s, Vaseline |
| Personal care | Dove body wash, Axe, Rexona, Pepsodent, Signal |
| Home care | OMO detergent, Comfort fabric softener, Sunlight dish soap, Cif cleaning products |
| Nutrition | Knorr noodles, Hellmann’s dressings, regional favorites |
| Ice cream | Ben & Jerry’s, Talenti, Cornetto, Magnum |
Unilever boasts a diverse portfolio of more than 400 brands, each with its own market presence, sold across 190 countries. These brands span various categories, including beauty and wellbeing, personal care, home care, nutrition, and ice cream.
Unilever’s International Reach and Marketing Strategy:
(NYSE: UL) stands out for its significant reliance on international markets, with approximately 78% of its sales stemming from outside North America, notably 58% from emerging markets. This international exposure grants Unilever remarkable growth opportunities within the consumer staples sector.
In 2023, despite registering a robust 7% growth in underlying sales (excluding foreign exchange effects), Unilever experienced a slight 1% decline in sales under generally accepted accounting principles (GAAP) due to the strengthening U.S. dollar. Nevertheless, these fluctuations are viewed as temporary challenges inherent in Unilever’s expansive global operations.
To maintain efficiency amidst its global footprint, (NYSE: UL) is concentrating its marketing efforts on its 30 “power brands,” which contributed approximately 75% of the company’s total sales in 2023. Remarkably, these power brands exhibited a 9% growth rate during the year, surpassing the company’s overall growth by 2 percentage points. This strategic focus underscores Unilever’s commitment to maximizing the potential of its most influential brands on a global scale.
Unilever’s Ice Cream Business Spin-Off:
Unilever recently announced its intention to divest its ice cream business, a strategic move aimed at offloading its lowest-margin segment among its five business divisions. Operating with a margin of just 11%, significantly lower than the 17% average across other segments, (NYSE: UL)’s ice cream operations have been putting pressure on the company’s overall profitability.
The ice cream division necessitates greater capital investment due to its specialized cold storage supply chain needs. By operating autonomously, it could hone its focus on its distinctive business model and uncover new synergies within a more streamlined operational structure.
This separation of the ice cream business is expected to reshape UL into a leaner and more efficient organization, potentially leading to a more favourable valuation from the market. This anticipated uptick in profit margins could spark renewed investor interest and bolster UL’s share price growth, particularly given its current trading near its lowest valuation since 2015.
Unilever’s Analyst Predictions 2024:
- (NYSE: UL) is anticipated to experience earnings and revenue growth rates of 4.5% and 3.4% per annum, respectively, with EPS expected to increase by 4.3% annually.
- Return on equity is forecasted to reach 34.5% over the next three years.
Valuation and Growth Potential:
- UL stock shows significant growth potential with an estimated valuation of $56 per share, representing approximately 15% above the current market price.
- This forecast is based on a forward expected revenue of €24.86 per share in 2023, compared to the last three-year average.
Strategic Actions and Market Positioning:
- (NYSE: UL)’s strategic focus on strengthening its top “Power Brands” aims to drive revenue growth and enhance margins.
- The transformative influence of Nelson Peltz could potentially foster a culture of excellence, akin to his successful endeavours at Procter & Gamble.
- Through strategic initiatives and market positioning, UL aims to bolster its recovery and capitalize on growth prospects.
Unilever’s Rare Valuation Opportunity
Unilever’s current 3.9% dividend yield and modest 1.8 price-to-sales (P/S) ratio suggest that the company might be trading at its most attractive valuation in a decade.
In 2023, (NYSE: UL) achieved a commendable 12% free cash flow (FCF) margin and is currently valued at a conservative 15 times FCF. This stands in contrast to similar companies in the consumer staples sector, which typically trade at much higher FCF multiples, ranging from 24 to 31 times.
Despite its robust cash generation, (NYSE: UL) utilized only 62% of its generated FCF in 2023 to cover its impressive 3.9% dividend yield. This leaves ample room for potential future dividend increases and sustained share repurchases, which have effectively reduced UL’s outstanding share count by an average of 2% annually over the past three years.
The combination of these shareholder-friendly cash returns, (NYSE: UL)’s expansive global footprint, ongoing operational enhancements, and its discounted valuation present a compelling investment proposition for patient investors seeking long-term stability and growth potential.
