From Morningstar:

Unilever’s fourth-quarter results are focused on sales volume. While its third-quarter sales showed 5.2% growth, the key driver was pricing, and volumes were down. Unilever’s own guidance for sales growth for 2023 is at least 5%. Fair value estimate: EUR 52/£45.60; Current price: EUR 46,00; £39; Morningstar Rating: ★★★★; Morningstar Economic Moat Rating: Wide; Morningstar Uncertainty Rating: Low.

Unilever faces competition from private-label brands and down-trading activities. Market share decreased to 38% in Q3 2023, due to stock policies at resellers, pricing dynamics, and consumer shifts, as well as Unilever’s decision to rationalize its product offering. Categories like ice cream have higher competitive intensity.

Unilever announced a three-pillar action plan to drive growth: faster growth, productivity and simplicity, and better performance culture. Morningstar analyst Ioannis Pontikis believes the plan is a step in the right direction. It is expected to help the company achieve multi-year financial goals.

Unilever’s immediate challenge is passing cost inflation on to consumers. The company has been successful in leading pricing and minimizing volume impact. Pontikis expects 2023 to be another year of above-average pricing contribution to organic growth. At the current share price of around €46 (£39), Unilever is slightly undervalued.



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