Unilever ULVR reported fourth-quarter underlying sales growth of 4.0%, slightly below company-compiled consensus of 4.1% due to worse-than-expected volume growth (2.7% versus 3% consensus). Shares were down 6% on the news and were also hit by management’s cautious stance on first-half 2025.
Key Morningstar Metrics for Unilever
Analyst: Diana Radu, CFA
- Fair Value Estimate: GBX 4750.00
- Morningstar Rating: ★★★
- Economic Moat: Wide
- Morningstar Uncertainty Rating: Low
Why it matters: Volume growth, despite being solid compared with peers, did not accelerate compared with previous quarters. The market is concerned that Unilever will be unable to maintain its stellar performance streak from the last four quarters despite making good progress on its transformation plan.
Investment in marketing increased to 15.5% of sales compared with 14.3% in 2023, the highest level of support for its brands in over a decade.
Unilever Stock Price Versus Fair Value Estimate
Despite this, 2024 underlying operating margin improved by 170 basis points to 18.4%, supported by net productivity gains and tailwinds such as input cost deflation, volume leverage, and positive mix.
The bottom line: We confirm our fair value estimates of EUR 57, GBX 4,750, and USD 59 for wide-moat Unilever. At current levels, shares are fairly valued with slight upside following the post-announcement correction.
We believe the reaction by investors is overblown. Market weakness in the first half of 2025 is likely to be offset during the year, given Unilever’s continued efforts to improve the effectiveness of its innovation and marketing and a slightly higher price contribution.
To that end, management guided for 3%-5% organic sales growth and a modest operating margin improvement in 2025, aligned with midterm guidance. We forecast 4.2% organic sales growth for 2025, which would still represent a good result given the challenging market environment.
Coming up: Unilever has also announced further details on the listing structure for the soon-to-be-demerged icecream business. The primary listing will be in Amsterdam with additional listings in London and New York. The demerger is expected to be completed by the end of 2025.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.