Unilever PLC (LSE:ULVR)’s positive interim results and forward guidance have led to optimism among analysts at Berenberg.
There are “a few reasons to be positive” on Unilever stock, despite numerous challenges faced during the past year, not least “significant” SKU rationalisation.
Despite a rise in input costs, gross margins have improved, and EBIT margins were higher compared to the first half of 2022, demonstrating the company's ability to manage costs effectively, according to Berenberg.
Looking ahead, Unilever's management has provided guidance for 2023, expecting organic sales growth to be above 5%, with a slight improvement in operating margins from the 2022 base of 16.1%.
The guidance also includes the expectation of a 6% currency headwind to 2023 sales and a 7-8% drag on earnings per share due to currency effects.
As a result of the strong performance and positive outlook, Berenberg has reiterated its buy recommendation on Unilever's stock.
Unilever’s growth potential is not yet fully reflected in its valuation, which is trading at a considerable discount compared to its peers in the industry like Nestlé, P&G, and Colgate-Palmolive, according to Berenberg.