Analyst Note| Philip Gorham, CFA, FRM |
Unilever's fourth quarter was better than our forecasts, but a sequential slowdown from the strong third quarter. Revenue was roughly in line with our estimates, although solid cost control meant that margins held up slightly better than we had anticipated, and this trickled down to a modest EPS beat. Free cash flow of EUR 7.7 billion was also impressive. The negative reaction of the market in early trading on Thursday is most likely attributable to the revelation that Unilever will incur restructuring expenses of EUR 1 billion in each of 2021 and 2022. While this was a good quarter, we think the trajectory of the underlying business and the news of this incremental spending support our thesis that the customer acquisition cost is likely to rise for Unilever going forward. We retain our medium-term estimates, our EUR 50 fair value estimate, and our wide economic moat rating.