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On Friday, Citi analysts maintained a positive outlook on Unilever (LON:ULVR) plc (UNVR:LN) (NYSE: UL), reiterating a Buy rating alongside a GBP52.00 price target. The consumer goods giant, known for its wide array of products ranging from personal care items to food and beverages, has been navigating a challenging economic landscape.
Citi analysts have adjusted their expectations for Unilever’s first-quarter organic sales growth (OSG), decreasing it by 0.40 percentage points to 2.5%. This revision reflects the continued consumer weakness in developed markets and a subdued pricing environment in Southeast Asia. Despite these adjustments, Citi’s long-term perspective on Unilever remains optimistic.
The analysts anticipate that Unilever’s financial narrative will be heavily weighted towards the latter half of the year, expecting a trough in Q1 OSG and a slight decline in first-half margins by 20 basis points. They also noted potential disruptions to the investor base due to the proposed spin-off of Unilever’s ice cream business in the second half of the year.
Looking ahead, Citi forecasts a significant recovery in Unilever’s margins in the second half of the year, driven by price increases that exceed the cost of goods sold (COGS) inflation and mid-single-digit OSG. While no additional share buyback is expected in the second half, the analysts believe that Unilever’s strong free cash flow (FCF), potentially bolstered by accelerated food disposals, will enable a shift in narrative towards more substantial capital returns in fiscal years 2026-2027.
The Citi team’s stance on Unilever reflects a belief in the long-term value of the company, despite the current visibility challenges faced by the fast-moving consumer goods (FMCG) sector. They underscore the potential for Unilever to deliver compelling returns to shareholders in the future.
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