Unilever’s (ULVR) stock price has struggled to post gains in 2022 despite the arrival of activist investor Nelson Peltz on its board and announcement of search for a new chief executive in recent months.
As of end-October 2022, Unilever stock posted negative returns of 1.4% year-to-date. Investors will be hoping that a fresh face at the company’s helm will usher in a new phase of growth for the century-old firm.
Will Unilever activist investors help turnaround the stock performance? Here we take a look at the latest developments.
What is Unilever?
Unilever is a global consumer goods (FMCG) company with a presence in over 190 countries.
The company owns over 400 consumer brands, with Dove shampoo, Hellmann’s mayonnaise, Ben & Jerry’s ice cream and Axe deodorant among its most famous brands.
Unilever operates under five business groups: beauty and wellbeing, personal care, home care, nutrition, and ice cream. Each business group accounted for turnovers worth between €7bn to €12bn ($6.96bn to $1.93 bn) in 2021.
According to the company’s website, Unilever’s origins go back to the early 18th century when a family of carpenters began selling butter in the Netherlands.
In November 2020, Netherlands-based Unilever N.V. was acquired by Unilever PLC to complete the unification of the company’s legal structure under a single parent company.
Unilever’s primary listing is on the London Stock Exchange (LSE) under the ticker ULVR. The company is also listed on the New York Stock Exchange (NYSE) under the ticker UL and on the Euronext Amsterdam (AEX) under the ticker UNA.
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Unilever activist investors: Can Nelson Peltz turnaround ULVR?
In recent years, Unilever has suffered from slowing sales, a poor merger and acquisition record, and Unilever stock price underperformance.
In the past five years, the Unilever stock value has dropped about 8%, as of 31 October. In comparison, Switzerland-headquartered Nestle (NESN) has climbed over 27% and US-based Procter & Gamble (PG) over 56% in the same period.
The underperforming company attracted the attention of activist investor Nelson Peltz who built up enough stake in the company via his hedge fund Trian Partners to get a seat on the company’s board by July 2022.
Investors turned optimistic as Peltz came with a pedigree of turning around several consumer companies, such as Procter & Gamble, H.J. Heinz and Mondelez International.
Since the arrival of activist investors, the company has seen significant developments, including the company’s reorganisation into a five business group operating model with each group accountable for delivering its own strategy, growth and profits.
“The new model will underpin improved performance by reducing complexity and ensuring we can respond to consumer and channel trends faster than ever before,” said Unilever on 10 October 2022.
The firm also announced that chief executive Alan Jope will retire from the company at the end of 2023 after five years in the role. The company added that it had begun a formal search for a successor and was considering both internal and external candidates for the top job.
Reuters reported citing an internal source that Peltz had met two possible candidates with experience at consumer good firms to replace Jope. The news agency added that contenders were not former Procter & Gamble employees, a company Peltz had prompted a major turnaround in.
The market reacted positively to the Unilever news of its CEO’s departure. ULVR stock closed nearly 2% higher on 26 September.
Jope’s critics have raised questions about Unilever’s failed attempt to acquire consumer health company GlaxoSmithKline (GSK) in early 2022, and the focus shift towards high margin health, beauty and hygiene products during his tenure.
Analyst commentary and forecasts for ULVR
Philip Gorham, director at research firm Morningstar, placed a fair value estimate of £43.00 on the company’s shares, representing an upside of about 9% from the Unilever stock price of £39.42 on 31 October. Gorham wrote on wide-moat Unilever in a 28 October note:
“Unilever’s total returns have been lacklustre in recent years, and we consider the stock to be slightly undervalued. However, we think the investment case depends on potential restructuring and an improvement in financial performance that may occur when the new CEO is put in place; visibility into medium-term strategy is very limited.”
Elsewhere, a new Unilever stock analyst rating compiled by MarketBeat revealed three out of seven analysts rated ULVR stock ‘buy’, three rated it ‘hold’ and one rated it ‘sell, as of 31 October. The consensus Unilever stock price target came in at £41.50, with the highest of £41.80 and the lowest of £31.70.
When looking for ULVR stock predictions, it’s important to bear in mind that analysts’ forecasts can be wrong. You should do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in the market, your account’s size and trading strategy. Never trade money that you cannot afford to lose.
FAQs
Is Unilever publicly traded?
Unilever’s primary listing is on the London Stock Exchange under the ticker ULVR. The company is also listed on the New York Stock Exchange under the ticker UL and on the Euronext Amsterdam under the ticker UNA.
Who owns Unilever?
The Euronext website showed investment firm Blackrock owned over 8% of Unilever, as of 28 October.
Is Unilever a good stock to buy?
Unilever stock analyst ratings compiled by MarketBeat, as of 31 October, revealed three out of seven analysts rated ULVR stock a ‘buy’, three a ‘hold’ and one a ‘sell’. Note, however, that their ratings can be wrong and shouldn’t be used as a substitute for your own research.
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