Unilever Down to Underperform - Analyst Blog
16 März 2012 - 6:09PM
Zacks
We recently downgraded our rating on Unilever N
V (UN) to Underperform from Neutral weighed down as it is
with continued input cost headwinds and a difficult macro-economic
environment which shows no signs of near-term abatement.
Unilever recently announced fourth quarter and full year 2011
results. Unilever’s core-earnings per share of €1.41 ($1.96) in
fiscal year 2011 increased 4% from the prior year on the back of
sales growth. However, gross margins went down by 180 basis points
due to higher input costs.
Moreover, Unilever witnessed a tough economic environment in
2011 which is expected to persist in 2012. We thus reduced our
earnings per share estimate for 2012 from $2.31 to $2.24 and the
revenue forecast from $68.8 billion to $66.4 billion.
Volume growth slowed in 2011 due to rising commodity prices and
weaker consumer demand. Unilever sources a wide variety of raw
material and packaging materials internationally, which are subject
to price volatility.
The company sources two-thirds of its raw materials from
agricultural commodities, which in turn are heavily dependent on
factors such as weather, farming practices, global demand as well
as government programs and policies. Unilever expects commodity
prices to continue to rise in 2012.
The company remains exposed to unfavorable foreign currency
translations as it has a considerable international presence. With
rising investments in the emerging markets, Unilever also faces
economic and political risks.
In addition, the debt crisis in Europe can badly impact the
company’s European supply chain and the operations of the company.
Further the company faces intense competition from its rivals, such
as Procter & Gamble (PG), Kraft
Foods (KFT), Kimberly-Clark (KMB) ,
Nestlé, Colgate, Sara Lee (SLE) and Shiseido, as
well as from local and regional players in the respective countries
of operation. Changing consumer preferences also keep the company
on its toes.
Given the challenges ahead for Unilever, we remain bearish on
the stock.
KRAFT FOODS INC (KFT): Free Stock Analysis Report
KIMBERLY CLARK (KMB): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
SARA LEE (SLE): Free Stock Analysis Report
UNILEVER N V (UN): Free Stock Analysis Report
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