“Good start to 2014“, that’s how the first-quarter headline went for Unilever (LSE: ULVR) (NYSE: UL.US) in April, and shareholders will be expecting more of the same from the next installment on 24 July when we learn what’s happened over the past six months.
Q1 brought sales growth of 3.6%, once negative currency conversion affects were accounted for. And as if to emphasise the global reach of Unilever’s 200 or so household brands, the firm reported a 6.6% rise in underlying sales in emerging markets.
Sensible targets
Chief executive Paul Polman said at the time that “We remain focused on achieving another year of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cash flow” — and though those might sound like obvious priorities for any company, it’s surprising how many don’t seem to see it that way.
The only cloud in an otherwise sunny report was the concern that “Unilever is involved in a number of ongoing investigations by national competition authorities“, but that doesn’t seem to have caused any real alarm.
The City’s analysts are expecting a flat year for earnings to December 2014, and that fits in with the balance between rising sales and adverse currency movements. There’s a more optimistic outlook on the cards for 2015, with a 9% rise in earnings per share currently predicted.
Steady dividends
For both years we should see comfortable dividend rises, to yield 3.4% this year and 3.7% next.
In financial terms, Unilever’s first-half report should be a “steady as she goes” thing, but the firm has had one bit of bad news this week — it’s lost the head of its Personal Care division, Dave Lewis, who is off to take over the reins at Tesco from outgoing boss Philip Clarke.
If you’d bought Unilever shares five years ago, you’d be sitting on an 80% gain, compared to the FTSE’s 50%. And you’d have enjoyed dividends that were a little better than average. But the price overheated a bit in early 2013, and it’s fallen 8% since then to today’s 2,644p. Does that make the shares cheap?
No bargain here
I don’t think it does, because we’re still looking at a forward P/E of 20, and that’s a bit high even by Unilever’s standards — though its solid management does justify something higher than the FTSE 100’s long-term average of 14.
Right now, I think the price is high enough — and the analysts agree, putting out an overwhelming Hold consensus.