On Wednesday, Jefferies updated its outlook on Unilever plc (LON:ULVR:LN) (NYSE: UL), raising the price target to £37.00 from the previous £34.00, while maintaining an Underperform rating on the stock. The adjustment follows the company's first-quarter results for 2024, which revealed a notable increase in volume and mix growth over a five-year compounded annual growth rate (CAGR), with particularly strong contributions from Latin America, accounting for 43% of the group's growth, and the Beauty & Wellbeing division, making up 53%.
The firm's analysis pointed out that while the recent performance spike was encouraging, it might be too early to credit Unilever's new "GAP strategy" for these results. The divisional heads are still in the planning stages of implementing this strategy. Despite this caution, Jefferies has raised its forecast for Unilever's full-year 2024 organic sales growth estimate (OSGe) to 3.9%, up from 3.3%.
The revised price target represents a 9% increase and is accompanied by an upward adjustment of 1% to the fiscal year 2025 earnings per share estimate (EPSe). Jefferies also noted that a 'corrected' next twelve months price-to-earnings (NTM PE) ratio of 19 times suggests that there is early belief in the potential of the GAP strategy. However, the firm expressed the view that such optimism might be premature at this stage.
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