Berenberg hikes target price on Unilever

Berenberg noted that underlying sales growth was 3.9% year-on-year, which was a touch below visible alpha consensus of 4.3% – driven by pricing of 1% - while volume/mix growth of 2.9% was slightly better than expected. Underlying operating margins in H1 were 19.6%, ahead of consensus estimates of 17.6%, and underlying H1 earnings per share came in 12% above estimates.

"We are pleased with the faster-than-expected inflection to earnings growth in 2024. Importantly, the higher earnings appear to be supported by what we would recognise as 'high-quality' drivers, such as volume growth and gross margins, which have been largely missing for Unilever since 2019," said Berenberg.

However, the German bank also noted that while the business is well on track to deliver strong earnings growth in 2024, it was not yet "firing on all cylinders", leaving room for further strong earnings growth in 2025, in its view.

"Our 2024 organic sales growth forecast is unchanged at 4.2%; however, our operating margin forecast is 18.3% (previously 17%), driving a 4% EPS upgrade. Our forecasts are based on a slightly higher tax-rate assumption of 26% (previously 25%)," concluded Berenberg, which stood by its 'buy' rating on the stock.

Reporting by Iain Gilbert at Sharecast.com