Shares in Unilever (ULVR) rose 2.7% today after the multi-national consumer goods company resleased its full-year and Q4 2023 results.
The earnings report revealed plans for a further €1.5 billion (£1.3 billion) share buyback during 2024, maintaining the same pace as in 2022 and 2023, even as it reported a decline in annual profits.
The London-headquartered company said pretax profit fell 9.7% to €9.34 billion in 2023 from €10.34 billion in 2022, as turnover slipped 0.8% to €59.60 billion from €60.07 billion.
Unilever declared a fourth-quarter dividend of €0.4268, unchanged from a year earlier.
The new share buyback programme is worth up to €1.5 billion, will begin in the second quarter of this year and will complete by the end of 2024. Last year, Unilever completed the second half of a two-year €3.0 billion buyback it had announced at the start of 2022.
Key Morningstar Metrics for Unilever Stock
• Fair Value Estimate: £45.60;
• Current Price: £39;
• Morningstar Rating: ★★★★;
• Morningstar Economic Moat Rating: Wide;
• Morningstar Uncertainty Rating: Low.
Morningstar equity analyst Ioannis Pontikis says that, all in all, the company's latest earnings report shows "a good close to the year", with results in line with company-compiled consensus and Morningstar estimates.
Margins improved by 60 basis points during the year with gross margin up 200 basis points and increased investments on 30 power brands (75% of sales) consuming 130 basis points, in-line with the newly created strategy.
Pontikis also notes core categories are performing well, with both beauty and wellbeing and personal care growing volumes in Europe, despite widespread consumer downtrading across several categories, reflecting robust elasticities and brand strength.
"Given the in-line growth number and guidance for the full year, our Fair Value Estimate for Unilever is unchanged at €52/$56/GBX 4,560, with minor adjustments for currency movements. Shares are undervalued," he says.
Unilever Invests in Power Brands
Looking ahead, Unilever expects underlying sales growth for 2024 to be within its multi-year range of 3% to 5%, with more balance between volume increases and price hikes.
It said it anticipates a "modest" improvement in underlying operating margin for the full year. It intends to deliver this via gross margin expansion "driven by a step-up in productivity and net material inflation back to more normal levels".
Commenting, chief executive Hein Schumacher said: "today's results show an improving financial performance, with the return to volume growth and margins rebuilding.
"However, our competitiveness remains disappointing and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever's full potential.
"In October, we set out a growth action plan focused on three priorities: delivering higher-quality growth, stepping up productivity and simplicity, and adopting a strong performance focus. The new leadership team has embedded the action plan at pace.
"We have increased investment behind our 30 power brands, accelerated portfolio transformation, and are driving a sharper performance focus with clear and stretching targets across the whole organisation.
"We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever into a consistently higher performing business".
With additional contributions by Sunniva Kolostyak
