Soap to soup marker Unilever is outperforming a falling FTSE 100 this morning after an upgrade from Panmure Gordon and stronger-than-expected sales figures from rival Nestle.
Unilever shares are up 26p, or 1.3%, at £19.66, making them the second biggest risers in a FTSE 100 down around 42 points at 5681.
Panmure Gordon has raised its recommendation on the shares to "buy" from "hold" and increased its price target to £23.00 from £20.00 ahead of results due out on April 29. It notes that Unilever's shares have "gone nowhere this year" and on a three-month basis have underperformed the market by 8%, the worst performance in the sector bar Premier Foods and Northern Foods. It also notes potential in emerging markets.
Analysts Graham Jones and Damian McNeela comment:
"Unilever's shares have been in the doldrums this year, but we think the Q1 results will be good, and see no reason why the shares won't be trading on c10x EV/EBITDA for 2011E by December."
"The long-term bull case for Unilever remains clear, it already has 50% of its sales in the emerging markets, with margins closing in on the group average. The demographic skew should be highly favourable for branded FMCG companies, moving from a pyramid to a diamond shape (ie the majority of the population moving to the middle from the bottom of the income curve). However, in the near term, a fierce price war in India has dragged on sentiment, but we note that from September to December last year Unilever has acted aggressively to address this, and emerging market volume growth accelerated sharply through 2009, while margins also rose strongly."
Reporting a week before Unilever, the world's biggest food group Nestle this morning unveiled a 6.5% rise in underlying first-quarter sales and it sounded a positive note on the demand outlook.
