What To Watch For In Unilever’s Full-Year 2018 Results

by Trefis Team
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Unilever (NYSE: UL) is scheduled to announce its fiscal full-year results on Thursday, January 31. The company’s turnover revenues decreased 5% year-over-year (y-o-y) in the first nine months of fiscal 2018, primarily due to a negative currency impact of 8.1% and a net impact from the disposal of the spreads business to KKR. However, the company’s organic growth of 2.9% was mostly comprised of volume growth of 2.3% and pricing growth of 0.6%. The consumer goods company reported improvement across major business divisions and benefited from strong volume growth in emerging markets in the period.

Our $58 price estimate for Unilever’s stock is almost 10% ahead of the current market price. We have created an interactive dashboard on What To Expect From Unilever’s Fiscal 2018 Results which outlines our forecasts for the company. In this dashboard, we have estimated the company’s full-year fiscal 2018 results (in U.S. dollars). You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation.

Future Outlook

Going forward, Unilever expects its full-year underlying sales growth to be at the bottom end of its range of 3% to 5% for 2018 and an improvement to 20% in the underlying operating margin, which will keep it on track for its 2020 targets. Overall, we expect Unilever to generate around $61.4 billion (+1% y-o-y) in revenues in 2018, and earnings of almost $7.7 billion. Of the total expected revenues in 2018, we estimate $13.7 billion in the Foods business, around $11.5 billion for the Refreshments business, nearly $23.8 billion for the Personal Care segment, and almost $12.2 billion in the Home Care business.

Personal Care is Unilever’s largest segment, having overtaken Foods in 2011 to take the top spot. The company’s shifting priorities are evident from the fact that the revenue share of its Foods unit has fallen from 30% in 2011 to 23% in 2017, while the share of its Personal Care segment has grown from 33% to 39% over the same period. More recently, Unilever named the expansion of the segment through acquisitions as one of its top priorities. Some of the recent acquisitions in the space include Quala, Carver Korea, Sundial, Schmidt’s Naturals, and EquilibraSuch strategic acquisitions will ensure that this segment remains a key growth driver for the company going forward.

Unilever is expected to benefit from its ‘Connected 4 Growth’ initiative, which includes supply chain simplification, innovation, and cost-saving initiatives. Going forward, the company expects increased investment in brands and marketing, which could help grow volumes in the Personal Care segment. We expect the company’s full-year adjusted EPS to come in at around $2.44.

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