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Why Unilever Stock Popped Today

By Jeremy Bowman – Jul 23, 2020 at 2:39PM

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The consumer packaged goods giant posted solid second-quarter results.

What happened

Shares of Unilever (UN) (UL -0.07%) were moving higher today as the global consumer products company posted better-than-expected results in its second-quarter earnings report, showing it was weathering the coronavirus crisis well. 

As of 2:13 p.m. EDT, the stock was up 7.2%.

Two pints of Ben & Jerry's ice cream

Image source: Unilever.

So what

The maker of products including Ben & Jerry's ice cream, Hellmann's mayonnaise, and Dove skin care products said that overall revenue declined 3.1% to 13.3 billion euros ($15.44 billion), but organic sales, which strip out the impact of acquisitions, divestitures, and currency exchange, declined just 0.3% compared with analyst expectations of a 4.3% slide.  

Performance in home care and grocery foods was strong, boosted by stocking-up behavior from the pandemic, but sales of products like deodorant and hair care, as well as away-from-home food purchases, slipped as consumers spent more time at home. Adjusted earnings per share rose 6% in the first half of the year, beating estimates.

CEO Alan Jope said, "Performance during the first half has shown the true strength of Unilever. We have demonstrated the resilience of the business -- in our portfolio, in a continued step-up in operational excellence, and in our financial position -- and we have unlocked new levels of agility in responding to unprecedented fluctuations in demand."

Investors also seemed to like the company's decision to separate its tea business, excluding operations in India and Indonesia and its ready-to-drink joint ventures, into a separate entity. That business, which includes the Lipton tea brand, generated 2 billion euros in revenue last year.

Now what

The company did not offer guidance for the current quarter or the rest of the year, but investors should be satisfied with flat organic growth during a global pandemic, as parts of the business that have been affected by the crisis, like away-from-home purchases and certain beauty products, should recover as the crisis fades. 

At a time when a number of consumer staples stocks are seeing declining revenue, Unilever's diversified business model is proving reliable. Going forward, investors should count on steady growth while they reap the benefits of a 3.2% dividend yield.


Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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