Will Acquisitions Drive Unilever (UN) Performance In Q2?
Zacks Investment Research | Jul 17, 2017 08:47AM ET
Unilever (LON:ULVR) NV (NYSE:UN) is set to report second-quarter 2017 results on Jul 20. Last quarter, the company delivered organic sales growth of 2.9% (in local currency).
A glimpse of Unilever’s stock performance shows that its shares have been rallying for the last six months. Shares have rallied 37.4% over the said time frame, outperforming the Zacks categorized Soap & Cleaning Materials industry’s 13.1% gain. Notably, the industry is part of the top 3% of the Zacks Classified industries (7 out of the 256).
Unilever currently sports a Zacks Rank #1 (Strong Buy) and we believe there is much value in the stock which is quite evident from its VGM Score of ‘B’.
Let's see how things are shaping up for this announcement.
What’s Driving the Stock?
The Anglo-Dutch company Unilever has been trending higher on the back of its recent strategic business reviews, aiming to deliver profits and boost shareholders value amid sluggish growth and increasing competition in the global packaged goods industry.
The consumer products giant is divesting its underperforming businesses and has reportedly decided to sell its unprofitable spreads business , including brands like Flora and Stork butter, in April. Furthermore, the company announced that it would buyback shares, hike dividends, raise cost savings target as well as combine foods and refreshments businesses.
Unilever has also undertaken a program called Connected 4 Growth to reduce costs, under which individual expenses are reviewed during each accounting period rather than rolled over. The company is also consistently focusing on product improvement through innovation. Moreover, it has set a target for net debt of two times EBITDA, which would mean enough flexibility for acquisitions or returning cash to shareholders.
Notably, Unilever has entered into many deals to fortify its position in home care and personal care products. These acquisitions will strengthen its portfolio and generate substantial revenues. Unilever is reportedly battling with meat producer Hormel Foods Corporation (NYSE:HRL) to buy the foods division of British consumer goods maker Reckitt Benckiser.
Meanwhile, the company continues to struggle with declining volumes in Brazil. Further, it is witnessing softness in the developed markets in North America and Europe with little sign of recovery. Nevertheless, the company remains focused on boosting sales in the emerging markets which accounts for about two-thirds of the company’s total revenue. Though these markets are generally volatile, they offer robust long-term prospect.
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