16th April 2015
As Unilever provides a first quarter trading update, Ian Forrest, investment research analyst at The Share Centre, explains what it means for investors…
On Thursday consumer goods giant Unilever cheered the market with its first quarter update. It reported a strong recovery in its performance compared to the previous quarter, with an overall 12.3% rise in sales. Underlying sales growth was also up 2.8%.
Unilever’s forecast-beating results were boosted by favourable currency movements, such as the strong dollar. This is good news for investors in the Ben & Jerry’s ice cream and Dove soap manufacturer, as is the 6% rise in the quarterly dividend.
The group remains keen to expand in emerging markets, and investors should note that an ongoing cost-cutting programme is steadily increasing profit margins and helping to offset higher commodity costs.
The company said it expects volume growth to continue to improve, backed by a good pipeline of innovative products, and it is now experiencing more tailwinds than headwinds.
As a result of these good figures, alongside the upbeat comments on future prospects, we are upgrading our recommendation to a ‘buy’ for lower risk investors. The well managed and diverse portfolio of global brands and the healthy dividend are also major attractions. Unilever shares trade on a fairly high price/earnings multiple at present, so we would suggest investors drip-feed steadily into the stock over time.