Thursday, October 8, 2020

An International Equity holding: Unilever ADR (UL, $62.69): “A Believer in Unilever” by Molly O’Neill, AIM Student at Marquette University

Unilever ADR (UL, $62.69): “A Believer in Unilever”

By: Molly O’Neill, AIM Student at Marquette University

Disclosure: The AIM International Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


 Unilever ADR (NADAQ: UL) is a multinational consumer goods company that provides fast moving consumer goods. UL operates in three regions: Asia, and Central and Eastern Europe, and the Americans and Western Europe. UL is headquartered in London, United Kingdom. 

• UL operates in through a diverse portfolio of products which includes salad dressings and spreads, ice cream and beverages (39.67% of sales); personal care (40.45%), and home care (19.87%).

• UL’s brands include Axe & Lynx, Blue Band, Dove, Becel & Floral, Heartband ice creams, Hellmann’s, Lipton, Omo, Lux, Rexona and Sunsilk. 

• Unilever’s strong brand presence, has opened the door for new market opportunity for consumers looking for eco-friendly products.  

• Unilever’s Coronavirus impact score was 39%, while competitors (P&G, L’Oréal) ranged from, 40-55%.

• UL’s stock price has dropped 21.94% in April, due to the Coronavirus Pandemic. 

Key points: 

Unilever ADR continues to beat market expectations. After the installation of a new CEO in 2019, Mr. Alan Jope, the company’s focus moved towards growth execution and enhanced organizational culture. UL has been increasing their operational efficiency. Halfway through FY20, management reported an operating margin of 19.8%, 1.5% higher than the previous year. UL has also been focusing on omni channel sales models, partnering with large retailers like Tesco, Carrefour, and Walmart. UL’s products can be found in 190 countries, they hold the #1 share in the personal care and #2 in home care in most countries. Unilever is also a M&A machine, acquiring 41 companies since its inception. This allows UL to diversify their product lines in various countries. 

Unilever faced challenges during FY20, with the change in consumer habits and lock-down changes during the period. UL currently holds over $3.23 billion in cash on their balance sheets. Likewise, they have a $1.5 billion in commercial paper, backed by $7.5 billion of undrawn committed facility. In response to the pandemic, UL has been driving their e-commerce channels. Ecommerce sales grew 49% half-way through FY20 (6% of sales). Overall, UL remains in a great market position and has proved this in their Q2 FY20 earnings report.

What has the stock done lately?

Today, Unilever’s stock is trading at a record high of $62.69, this year. Pre-pandemic, Unilever stock was trading around $60.00. Since the global shutdown on March 16th , UL’s stock has been improving. 

Past Year Performance:

Over the past 52 weeks, UL’s stock price has ranged from $44.06 – $62.91. Likewise, stock has increased 5.52% in value and total return of 9%; but the stock continues to be undervalued by the Street given their rebound from the pandemic. On March 21st, UL hit its 52-week low at $47.17. Following the dip, UL has been increasing and now trades at $62.69. 

Source: FactSet

My Takeaway

UL was added to the international AIM fund in April 2020 at a price of $51.22, with an initial price target of $69.15. Since Unilever was pitched, UL’s price has already increased 22.40%. Unilever has a strong brand presence in over 190 countries. With a strong ESG plan in place and an emphasis on growth, UL has positioned themselves as a strong competitor. Consumers are always in need of food and beverages and household essentials, but buying eco-friendly products serves consumers well in today’s environment. Furthermore, UL just acquired Olly, which is a specialized nutrition company. Olly products include a wide variety of vitamins, which are on the rise with consumers trying to battle COVID-19. I believe UL’s diverse portfolio of products will positively impact the company during the pandemic and is valuable to the international AIM fund. 

 Source: FactSet