Opinions
Christine Poole
Unilever PLC
UL-N
BUY
Dec 14, 2016
Stock price when the opinion was issued
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60% of revenues come outside North America, which are currencies that are fading against the strong US dollar which rose along with interest rates. If the USD falls, then the S&P could underperform (they've outperformed the past 10 years). UL needs a lower USD to increase earnings. He still owns it. Pays a near-4% dividend, so he's holding onto it and waiting.
Consumer staples are outperforming in the last few days, and that speaks to the advantage of having a balanced portfolio. Companies like KHC, UL, KVUE, and Nestle. It's not that they won't be affected (their costs would go up), but they're far less cyclical than other businesses. Earnings will be much more stable. Earnings could fall 10%, but not 50%. Dividends will be sustained.
Companies like Unilever and Nestle are huge in NA, but huge globally as well.
New management has made this a growth business again. Earnings and margins are rising. Cost structure is fantastic. Are in 190 countries. Are spinning off their ice cream business which should create shareholder value. Trades at 17x PE and pays a 3.3% dividend. One of the fastest growing consumer products companies.
(Analysts’ price target is $69.60)
Has held this in her clients’ portfolios for a number of years. She owns this for its exposure to emerging markets, the consumer packaged goods. Over 60% of revenues are from emerging markets. A lot of the economies in emerging markets have been going through a difficult time, so this is affecting them. Given the pullback, it is an opportunity. Long-term, this is where their secular growth is. They have been expanding into personal care, which tends to have higher margins than the packaged foods business. Has an attractive yield of over 3%.