What's In The Cards For Unilever (UN) This Earnings Season?

Unilever (LON:ULVR) NV (NYSE:UN) is set to report second quarter 2016 results on Jul 21. Last quarter, the company delivered organic sales growth of 4.7% (in local currency).

Let's see how things are shaping up for this announcement.

Factors to Consider

Unilever has been delivering weak results since the past few quarters due to continued slowdown in the emerging markets, which account for about two-thirds of the company’s total revenues. Though emerging markets offer strong long-term growth prospects, they are generally volatile.

Despite these challenges, Unilever has delivered organic sales growth of 4.7% in the first quarter of 2016, which was toward the upper end of the 3% to 5% range expected for the year. This was driven by pricing gain of 2% and volume growth of 2.6%. Organic sales growth was weaker than 4.9% growth recorded in the preceding quarter.

Emerging markets growth improved from the preceding quarter, backed by higher volume. However, many emerging markets continued to remain weak with currency devaluation pushing up the cost of living and squeezing disposable incomes. Developed markets declined 0.3% in the quarter as against 0.3% growth in the preceding quarter with volume growth offset by widespread price deflation in Europe.

UNILEVER N V Price and Consensus

UNILEVER N V Price and Consensus | UNILEVER N V Quote

In the coming quarter, Unilever is likely to benefit from weak commodity prices, which will help improve its operating margins. Also, irrespective of economic conditions, consumption of personal care and hygiene products like soaps are recession proof.

Encouragingly, the company has managed to accelerate its cost containment measures to remove unnecessary costs and simplify the business. Though there are deteriorating trends in Europe, Brazil and Russia and sluggish consumer demand overall, Unilever is consistently focusing on improving its products through innovation, accelerating its cost containment measures to remove unnecessary costs and simplifying the business.

Unilever has a Zacks Rank #3 (Hold).

Stocks to Consider

The following stocks in the consumer staples sector are likely to beat earnings this season. That is because these have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3:

Post Holdings, Inc. (NYSE:POST) with an Earnings ESP of +12.77% and a Zacks Rank #1.

Nu Skin Enterprises Inc. (NYSE:NUS) with an Earnings ESP of +2.60% and a Zacks Rank #2.

Tyson Foods, Inc. (NYSE:TSN) with an Earnings ESP of +0.94% and a Zacks Rank #3.