Opinions
David Driscoll
Unilever PLC
UL-N
COMMENT
Jan 11, 2018
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)
He believes in the stock. You are getting earnings growth of roughly 10% a year, and revenue growth anywhere from 2% to 4%. They are a little on the low side now, but just sold off their spreads business, so they have $6 billion in cash. Their strategy going forward is to have subsidiaries which are high margin/high growth. They want to reduce costs and overhead, and get margins higher so that they can a) pay down some debt and b) continue the dividend growth and c) capture more e-commerce markets. 43% of revenues are in Asia, and nobody else is close.