Stock of the Week: Unilever

Ice cream, comfort food and soap are the big sellers for the FTSE 100's largest company. Dividends and long-term share price gains are the big draw for the likes of Nick Train

James Gard 28 May, 2021 | 10:50AM
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Stock of the week post-it

With the bank holiday fast approaching and the weather looking more seasonal, our stock of the week has an ice cream theme. We asked our Twitter followers to chose between the owners of Cornetto, Green & Blacks and Haagen-Dazs. They’ve gone for Unilever (ULVR), home to a roster of international food and drink brands, and maker of Magnum, Carte D’Or, Ben & Jerry’s, Vienetta, Wall’s and Solero. But Unilever is about much more than ice cream, with personal and beauty brands like Dove and home staples like Persil and Domestos. The company is now the biggest component of the FTSE 100 index and is one of only two stocks, along with AstraZeneca (AZN), to boast a market capitalisation above £100 billion. A rejected takeover approach in 2017 by another stock of the week, Kraft Heinz, valued the company at $143 billion, around £110 billion at the time.

Covid-19 has impacted the company unevenly, say Morningstar analysts. With many restaurants, cafes and shops closed, Unilever sales of food and drinks in these outlets have inevitably suffered. And with barely any opportunities to socialise and with people working from home, beauty and personal care product sales have fallen. But certain trends have has been softened by the stay-at-home trends such as banking and demand for branded “comfort food” noted by the likes of Kraft (Unilever makes Cup-a-soup, Pot Noodle, Marmite and Knorr stock cubes). Morningstar’s Philip Gorham expects this trend to reverse, boosting beauty care over food categories, as economies re-open; that means less home baking, more partying (and higher spending on grooming products as workers go back into the office).

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is content editor for Morningstar.co.uk

 

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