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Highlights:
- Jefferies forecasts Unilever's organic sales growth at 3.3%, below market expectations.
- Product pricing may contribute negatively to sales as Unilever focuses on restoring competitiveness.
- Unilever faces challenges from slowing US consumer spending and disinflation, with Jefferies giving the stock an 'underperform' rating.
Unilever PLC (LSE:ULVR), the multinational consumer goods company behind brands such as Bovril and Vaseline, could miss its third-quarter sales growth targets, according to analysts at Jefferies. The investment bank has warned that the company's organic sales growth may only reach 3.3%, falling short of broader market expectations. This potential shortfall is driven by weaker product pricing and exposure to a slowdown in US consumer spending.
Jefferies analysts noted that Unilever’s pricing strategy may even contribute negatively to sales in the quarter, as the company focuses on restoring competitiveness in key areas of its product portfolio. The shift in pricing strategy comes as Unilever seeks to strengthen its position in core markets, but it may come at the cost of near-term sales growth.
In addition to pricing pressures, Unilever is contending with broader market challenges, particularly in the US. Jefferies highlighted that the company is exposed to a slowdown in US consumer spending, coupled with disinflation, rather than benefiting from falling input costs. This means that while Unilever’s costs may not be rising significantly, the expected moderation in pricing power could weigh on its performance.
Despite these concerns, Unilever's share price has rallied by over 25% year-to-date. However, Jefferies remains cautious about the stock's future performance, noting that Unilever's current valuation—trading at 19 times forward price-to-earnings—may lead to a pullback in the year ahead. As a result, Jefferies has assigned an 'underperform' rating to the stock, with a price target of 4,100p, down from its publication price of 4,894p.
Unilever is set to report its third-quarter results on 24 October, and investors will be closely watching to see whether the company meets or falls short of market expectations.
