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On Tuesday, BofA Securities made a noteworthy adjustment to its outlook on Unilever plc (LON:ULVR:LN) (NYSE: UL), downgrading the stock from Buy to Neutral. The firm also revised its price target for the consumer goods giant, setting it at GBP53.00, a decrease from the previous GBP55.00. The $157.5 billion consumer goods company has shown resilience with a 12.35% year-to-date return, according to InvestingPro data, which also indicates the stock is currently trading near its Fair Value.
The decision to downgrade Unilever’s stock rating comes as BofA Securities recalibrated its expectations for the company’s earnings per share (EPS) for the years 2025 to 2027. Analysts at the firm cited a combination of factors, including organic growth, foreign exchange impacts, and margin considerations, which led to an approximate 4.7% reduction in their EPS forecasts. InvestingPro data shows the company maintains strong fundamentals with a 45% gross profit margin and has consistently paid dividends for 34 consecutive years, demonstrating operational stability despite market challenges.
BofA Securities expressed concerns regarding the potential risks to Unilever’s consensus EPS for the year 2025 and the limited growth prospects for 2026. The analysts’ projections stand 3% below and 1% above the consensus for these respective years. They pointed out that the absence of EPS growth in 2025 could be attributed to the slowdown in developed markets and Unilever’s strategic investments in emerging markets, which are not expected to contribute to margin expansion in the short term.
Despite the downgrade, BofA Securities acknowledged Unilever’s strong position in favorable sub-categories and the possibility of market share gains. The analysts anticipate that EPS growth will resume from 2026 onwards. However, they also noted that a re-rating of the stock is unlikely in the near term, given its current price-to-earnings ratio of approximately 19 times the estimated 2025 earnings, which stands at a premium compared to other European staple stocks. The firm suggests that a more favorable valuation might be contingent on the successful demonstration of Unilever’s medium-term growth algorithm, which targets a 4-6% increase. InvestingPro analysis reveals a "GOOD" overall financial health score, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this prominent player in the Personal Care Products industry.
In other recent news, Unilever has been navigating a complex landscape with several significant developments. Citi analysts have maintained a Buy rating for Unilever, adjusting their expectations for the company’s first-quarter organic sales growth to 2.5%, reflecting challenges in developed markets and Southeast Asia. Despite a projected decline in first-half margins, Citi forecasts a recovery later in the year, driven by price increases. Meanwhile, TD Cowen also reaffirmed a Buy rating, noting that Unilever’s fourth-quarter organic sales growth aligned with expectations, despite a slight downturn following the company’s forecast for 2025. The forecast suggests more pronounced growth in the latter half of the year, with pricing adjustments anticipated to drive improvements.
In other developments, Unilever has removed Ben & Jerry’s CEO, Dave Stever, amid an ongoing legal dispute over the ice cream company’s autonomy on social policy issues. Ben & Jerry’s has filed a complaint in New York, asserting that Unilever’s actions violate their merger agreement. Additionally, Ben & Jerry’s founders, Ben Cohen and Jerry Greenfield, are reportedly considering repurchasing the brand, although Unilever has stated that the company is not for sale and plans to spin off its ice cream business. This planned spinoff is part of Unilever’s strategy to streamline its product portfolio, with the ice cream division generating significant revenue in 2024.
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