I’ve been underwhelmed by my Unilever (LSE: ULVR) shares since buying them in 2023 and 2024. Last night, I was sitting on a modest 12% gain and wondering whether I’d find more excitement elsewhere.
When I discovered the Unilever share price had fallen 6.6% this morning I was even less impressed. I’ve got no cash in my trading account. Is dumping Unilever the best way to raise it?
On checking, today’s full-year results weren’t quite as bad as I feared. The FTSE 100 consumer goods giant reported a 12.6% rise in annual profit to €11.2bn, plus a €1.5bn share buyback programme. What’s the problem?
Am I wasting my time with this FTSE 100 stock?
Underlying sales growth came in at 4%, just shy of the 4.1% expected by analysts. Not exactly a disaster, but when a company like Unilever misses modest expectations, investors tend to flip.
The board also warned of a “subdued” first half of the year before things (hopefully) pick up, driven by price increases as higher commodity costs filter through in 2025.
Unilever has long been a go-to defensive stock. It owns some of the world’s biggest consumer brands that are in millions of homes globally, providing a steady stream of revenue even in uncertain economic times.
Checking performance, I see the Unilever share price has actually climbed 19% over the last year. And that’s after today’s dip. So maybe I’m the one flipping for no reason. However, it’s up just 2% over five years. Performance has been surprisingly volatile for a supposedly defensive stock.
Unilever took its eye off the ball in that time. It became too big, too sprawling. CEO Hein Schumacher has restored focus but I wouldn’t call him transformative.
Also, I worry about the group’s long-term sales trajectory. Even in a good year, revenue growth is modest.
Growth prospects look modest
Management is guiding for growth of between 3% and 5% in 2025. That’s in line with its historical performance but hardly inspiring. Rivals like Nestlé and Procter & Gamble have grown faster lately.
Then there’s the demerger of its ice-cream division, home to brands like Ben & Jerry’s and Magnum. While this move could unlock value in the long run, it also adds an element of uncertainty. It’s another distraction for management.
Unilever remains a high-quality company with strong brands and a defensive edge. The dividend yield of 3.3% is decent, but hardly spectacular. Today’s price-to-earnings ratio of just over 21 doesn’t exactly scream bargain.
The 21 analysts offering one-year share price forecasts for Unilever have produced a median target of just over 5,032p. If correct, that’s an increase of around 13% from today. These forecasts would have been produced before today’s dip. They were even lower before.
For now, I’m holding. I don’t want to crystallise a sharp one-day loss. Unilever is likely to recover as bargain seekers emerge. But if an irresistible buying opportunity emerges in the weeks ahead and I still don’t have the cash, Unilever is top of my Sell list.
This post was originally published on Motley Fool
