Unilever Downgraded by Analysts

Slowing sales in 2014 have led analysts to downgrade their fair value estimate for Unilever, but the firm retains its wide economic moat due to the strength of its brand portfolio

Erin Lash, CFA 6 November, 2014 | 10:14AM
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Slowing global demand is taking a toll on Unilever (ULVR). Given its vast geographic footprint, foreign currencies have been a notable dark spot, constraining reported sales by around 7% through the first nine months of the year, and as such, we now expect sales to slip nearly 2% in 2014.

However, we view longer-term concerns related to this as overblown. In our view, Unilever's underlying performance, which excludes any foreign currency impact, is more indicative of its long-term trajectory, and we expect foreign currency rates will ebb and flow.

In addition, while negative foreign currency movements disproportionately weigh on emerging markets, we still expect these regions will outpace more mature markets over the near to medium term, reflecting austerity measures in Europe and high unemployment levels and intense competitive pressures, particularly in mature developed markets.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Unilever PLC3,951.50 GBP0.00Rating

About Author

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