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Kraft’s aborted bid for Unilever has piqued interest in the stock

Liberum Capital has given a lukewarm recommendation upgrade, whereas Barclays has highlighted catalysts.

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With a 'hold' Liberum seemingly neither loves nor hates Unilever

The upgrades continue to come for Unilever PLC (LON:ULVR) with an aborted bid having apparently piqued interest in the stock - as well as prompting management into action.

That action is focused on enhancing the company’s profit margins, which in turn has led to an uplift in earnings expectations.

Getting in on the action earlier Monday was Liberum, which moved its call to ‘hold’ from ‘sell’ after reinstating coverage.

That rather lukewarm recommendation was accompanied by a circumspect assessment of prospects.

“Consensus factors in more aggressive margin uplift over the next three years and speculation is rife about disposals and/or large shareholder returns,” said Liberum in a note to clients.

“While more aggressive earnings per share growth underpins the shares, failure to deliver on lifted expectations could result in a pull-back.”

On Friday Barclays Capital upgraded the consumer goods giant to ‘overweight’, citing the company’s shake-up plans as the catalyst.

Unilever embarked on a strategic review, which could lead to the sale or demerger of various businesses (but will more likely focus on cost control measures) after rebuffing a £115bn bid from Kraft Heinz.

“Unilever was arguably on the right course to improving profitability - but there's nothing like a little external pressure to expedite the process (whilst also forcing its hand into other means of value creation),” Barclays said in a note to clients.

The bank said it expects the company to extend the reach of its zero-based budgeting initiatives and “edge up” margin guidance when it unveils its self-help measures.

“Beyond a welcome sale (or demerger) of developed market spreads, we would not expect significant portfolio changes nor do believe there needs to be,” Barclays added.

Its price target is £43.60 - £3.50 ahead of the current share price. Liberum’s valuation is £38.70.

Of the 15 analysts logged as following Unilever, 10 are positive on the stock and there is only one with a ‘sell’ recommendation, according to the Brokerforecasts site.

Quick facts: Unilever PLC

Price: 4571 GBX

Market: LSE
Market Cap: £119.82 billion

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