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Investing.com -- BofA Securities lowered its rating on Unilever (LON:ULVR) to “neutral” and trimmed its price objective to 5,300 GBp, citing softer growth and margin pressures across both developed and emerging markets.
Analysts cut Unilever’s 2025 adjusted EPS forecast to €2.91 from €3.05, driven by weaker organic growth, a roughly 20 bps hit to margins in India and an adverse 20 bps currency impact at the group level.
While Unilever reiterated its aim for 3–5% underlying sales growth in 2025, BofA sees consensus expectations of 4.2% for the remainder of the year as overly optimistic amid slowing month-on-month trends in developed markets and continued headwinds in India, Indonesia and China.
Gross margin is now forecast at 45.5%, down from a prior 45.8% estimate, and operating profit margin at 18.6% versus 18.9% previously.
Despite medium-term confidence that EPS growth will resume at roughly 11% in 2026 and 8% in 2027, the current 19 times 2025 consensus P/E leaves little room for rerating until the company proves its 4–6% core growth algorithm.
In contrast, BofA upgraded Reckitt Benckiser (LON:RKT) to “buy” while keeping its price objective unchanged at 5,700 GBp, arguing that the stock’s roughly 14% pullback from mid-March peaks was unwarranted given sector-wide challenges.
Reckitt’s first-quarter results showed about 3% core sales growth, a beat on price offset by a volume miss, and a similar developed-market deceleration seen at Unilever and Procter & Gamble (NYSE:PG).
BofA now assumes 3.3% core growth for Reckitt in 2025, near the bottom of its earlier range, and modestly reduces its 2025–27 EPS forecasts by 1.4%, yet still sees 22% upside to the 5,700 GBp target and a valuation at roughly 13.7 times 2025 consensus earnings, a 27% discount to European staples.
Reckitt’s valuation looks unduly punitive, BofA says, given its portfolio of 11 “Powerbands” in faster-growing categories such as self-care, germ protection and household care.
Even after assuming £8–9 billion of cash proceeds from planned disposals, Core Reckitt trades at just 13–13.5 times P/E.
BofA flags Reckitt’s track record of steady margin expansion, forecast gross margin near 61% and a 300 bps reduction in fixed costs by 2027, and a solid mid-single-digit organic sales CAGR (3.8% from 2025 to 2027) that aligns with management’s 4–5% guidance from 2026 onward.
Potential litigation risks, including upcoming Daubert motions and MDL hearings, are covered by a cautious £2.9 billion provision and a conservative 0.3% litigation risk premium, leaving no threat to solvency or dividends .