Will Unilever (UL) Disappoint Investors Yet Again?
Unilever Plc (UL) is set to report third quarter 2014 results on Oct 23. Last quarter, the company delivered revenues of Euro 12.7 billion ($17.4 billion), which declined 4.8% year over year (in local currency). Let's see how things are shaping up for this announcement.
Factors to Consider this Quarter
Unilever’s sales growth has lost its pace since the fourth quarter of 2013, mainly due to slowdown in emerging markets, which account for two-third of its revenues. Though the company’s organic sales increased 6.6% (in local currency) in the emerging markets in the second quarter, it was flat sequentially as a result of economic uncertainty, particularly in Asia.
Organic sales growth was also much higher at 10.3% last year. We continue to expect sluggish sales due to soft growth in emerging markets in the upcoming quarter.
Developed markets like North America and Europe have also been weak since fourth quarter 2013 with little sign of recovery.
Moreover, the company anticipates the volatility in the external environment to persist. In addition, the company expects low- to mid-single-digit commodity cost inflation throughout 2014, largely due to currency headwinds.
Unilever has also been witnessing a slowdown in its spreads business, which is hurting profits at its Foods segment. The company is working to improve its ailing spreads business, which has suffered for years due in part to a consumer perception that margarine is less natural than butter. We believe the business will take time to return to profitability as it is still generating weak returns.
Unilever holds a Zacks Rank #4 (Sell). Estimates have also been declining steeply for 2014 and 2015 over the past 30 days.
Other Stocks to Consider
Below are some of the stocks worth considering in the consumer staples sector that are likely to beat earnings this season. That is because these stock have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3:
Post Holdings, Inc. (POST), with an Earnings ESP of +50.0% and a Zacks Rank #1 (Strong Buy).
Hershey Co. (HSY) with an Earnings ESP of +2.78% and a Zacks Rank #3
Newell Rubbermaid Inc. (NWL), with an Earnings ESP of +1.82% and a Zacks Rank #3.
Read the Full Research Report on UL
Read the Full Research Report on HSY
Read the Full Research Report on NWL
Read the Full Research Report on POST
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