Sales were up to $10.2 billion euros, 1% higher than last year -- a 3.3% improvement when you factor out the effects of currency. Note that while U.S.-based consumer-products companies like Colgate-Palmolive
Reported operating profit was down 0.8% on a restructuring charge. Excluding this item, operating profit improved 0.3%. Earnings per share jumped 40%, thanks to significantly lower finance charges and an improved tax rate. Those aren't my favorite earnings drivers, but Unilever seems to consistently find a way.
Cost pressures contained
The company reported a large (2.5%) increase in raw-material costs during the quarter, but noted that pricing flexibility and expense savings more than offset the impact. Unilever also noted progress during the quarter in its drive to simplify its management structure and accelerate the pace of change. A few examples of this include a recent joint venture with Pepsi
Buy, sell, or hold?
Investors were generally pleased with the results, bidding Unilever shares a couple of points higher on Thursday and Friday, while the rest of the market tanked on debt and oil-price concerns.
Over the past several years, there has never been a time when I would have cautioned against buying Unilever shares. The current valuation is rational at 17 times forward earnings, with a PEG ratio of 1.68 times the five-year expected growth rate. Over the years, investors have done well holding the stock. When I rated the "brand power" of the largest consumer-products companies a few months ago, I found Unilever solidly in the middle of the pack, though it lagged household names like Coke
I have argued that Foolish investors should consider consumer-products companies as a core holding in their portfolios. As a defensive stock with a tasty 3.6% dividend yield and upside potential, Unilever certainly fits that bill.
For more opinions on Unilever, check out these articles:
Unilever and Kraft are Income Investor selections. Discover more cash-generating, high-yielding superstar stocks when you check out the newsletter free for 30 days. Colgate-Palmolive and Coca-Cola are Inside Value picks.
Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, but doesn't own stock in any of the companies mentioned in this article. The Fool has a disclosure policy.