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Unilever PLC ADR UL

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

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Capital Allocation

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Unilever's First-Half Margin Pressure Looks Ominous for Short-Term FMCG Performance

Analyst Note

| Philip Gorham, CFA, FRM |

Unilever reported first-half results that were in line with our forecasts on the top line but missed our forecasts on profitability. With commodity costs still on the rise, management has lowered its guidance on input costs for the year and we have modestly lowered our near-term margin assumptions. The market has reacted negatively to the report, and we believe investors will rightly be concerned about the ability of Unilever to pass through inflation to consumers, given its fairly commoditized and competitive categories. Nevertheless, we still believe a 20% EBIT margin is achievable by 2023, and the short-term margin pressure has no impact on our EUR 50 fair value estimate. There is modest upside to our valuation, but it is difficult to see a swing in sentiment until inflation subsides or it becomes clear that the consumer is willing to absorb some of that cost pressure.

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Company Profile

Business Description

Unilever, plc is a diversified personal product (42% of 2020 sales by value), home care (20%), and packaged-food (38%) company. The firm's brands include Knorr soups and sauces, Hellmann's mayonnaise, Lipton teas, Axe and Dove skin products, and the TRESemme hair-care brand. The firm has been acquisitive in recent years, and high-profile purchases include the mail-order men's grooming business Dollar Shave Club and Seventh Generation cleaning and personal-care products.

Contact
100 Victoria Embankment
London, EC4Y 0DY, United Kingdom
T +44 2078225252
Sector Consumer Defensive
Industry Household & Personal Products
Most Recent Earnings Dec 31, 2010
Fiscal Year End Dec 31, 2021
Stock Type
Employees 149,000

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