The Unilever (LSE: ULVR) share price has barely budged after today’s first-half results, with the stock market reacting with a familiar lack of excitement to another mixed update from the FTSE 100 giant.
That feels par for the course. Unilever shares are down 5.8% over the last 12 months and 4.2% over five years. Not exactly thrilling for a business of this size and reputation.
Personally, I’m relieved. I gave up on Unilever back in March and dropped the stock from my Self-Invested Personal Pension. Today’s numbers haven’t made me regret the move.
Growth steady
Unilever’s headline numbers weren’t awful. Underlying sales growth hit 3.4%, with a reasonable balance between price increases (1.9%) and volume gains (1.5%). That group isn’t just passing costs onto shoppers but shifting more product too.
Its personal care division led the way with 4.8% growth, while ice cream sales rose 5.9% ahead of November’s planned demerger.
Emerging market growth is expected to pick up speed in the second half, particularly in Asia. Developed markets performed better, with underlying sales up 4.3%.
Gross margins climbed to a chunky 45.7%, helping fund increased brand and marketing investment. CEO Fernando Fernandez sounded bullish, with a focus on core brands and premium segments.
But not everything was upbeat. Turnover fell 3.2% to €30.1bn year on year, hit by adverse currency moves and business disposals. Underlying operating profits slipped 4.8% to €5.8bn, with margins down 30 basis points to 19.3%
Free cash flow halved to €1.1bn, hit by working capital demands and separation costs from the ice cream spin-off. Those aren’t disasters, but they’re not a reason for me to feel like I’ve missed out either.
FTSE 100 farewell
When I sold Unilever in March, I noted the shares had climbed just 10% over five years. That’s a poor showing from a £109bn global consumer goods colossus. The company had seemed sprawling and unfocused, and even its plan to concentrate on 30 ‘Power Brands’ hadn’t fully convinced me.
The shares have slipped since, yet the price-to-earnings ratio remains above the FTSE 100 average at 22.5. That’s not unusual for the stock, and confirms its strong reputation among investors, but I’m not convinced it’s justified by the growth outlook. The trailing dividend yield is 3.32%, which is fine but not standout.
Analysts are more upbeat than I am. The 19 setting forecasts have produced a median share price growth forecast of 12.7% over the next year, lifting the stock from today’s 4,467p to 5,038p. Forecasts aren’t guarantees, of course.
Better value elsewhere?
Of 22 analysts, 14 rate it a Buy, five call it a Hold, and only three a Sell. I’m happy to be in the minority on this one. I have no regrets over selling Unilever, and no plans to buy.
I don’t think the growth outlook is strong enough or the dividend quite juicy enough to tempt me back in, given what’s on offer elsewhere in the FTSE 100.
That said, investors looking for a portfolio cornerstone or a little diversification might consider buying Unilever. It’s a stable business, with a solid footprint in essential goods and long-term brand equity.
But for my stocks and shares ISA, I’m currently chasing higher dividends or faster growth. And a bit more excitement.
