Profit Warning Makes Unilever Shares More Attractive

Concerns regarding slowing growth in Europe and emerging markets have created an interesting buying opportunity, say Morningstar analysts

Erin Lash, CFA 2 October, 2013 | 3:50PM

On Monday, Unilever (ULVR) disclosed that slowing emerging market growth (which management has discussed at length over the past several quarters) plagued the firm in the third quarter, reflecting a stronger euro. From our view, though, these regions will still outpace more mature markets, as austerity measures in Europe and high unemployment levels in North America will likely keep a lid on consumer spending.

The firm held tight to its full-year forecast (volume growth above its markets and sustainable margin improvement), and despite recent pressure, we continue to anticipate Unilever will generate 5% annual sales growth over the longer term and 16% operating margins by 2022 (about 100 basis points above fiscal 2012 adjusted margins).

We don’t plan to adjust our valuation estimates in light of this announcement and still think that concerns regarding slowing growth in Europe and emerging markets have created an interesting buying opportunity.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Unilever PLC3,820.87 GBX-0.47

About Author

Erin Lash, CFA  Erin Lash, CFA, is a senior stock analyst with Morningstar.

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