Momentum is good! It shows a company is on the right track, making a lot of the right moves, and poised for steadily growing sales and profits in the future. Fourth-quarter results from Income Investor pick Unilever
Underlying sales grew 6.1% for the most recent quarter, capping off solid full-year sales growth of 5.5%. "Underlying" sales are the best measure of true growth for a consumer-products company because they factor out the effects of acquisitions, divestitures, and foreign exchange rates.
This compares favorably to recent quarterly sales growth rates at Procter & Gamble
All three geographic segments showed steady underlying sales progress. Business in Asia/Africa was up 10%, while sales in the Americas notched a 3.7% gain. European sales improved markedly, up 5.5% compared to a full-year trend of half that rate.
Operating margins improved 20 basis points to 11.1% despite a challenging commodity cost environment that has played havoc recently with competitors like Kimberly-Clark
Unilever is on a mission to deliver operating margins in excess of 15% by the year 2010. Full-year 2007 shows steady progress toward this goal -- margins expanded 0.2% to 13.1%. I'm impressed by this level of margin expansion in a difficult environment, but the company will clearly need to do some heavy lifting the next few years to achieve its goal. And investors who favor the consumer products segment should note that a 15% operating margin rate is still not in the same league as heavyweights like Pepsico
Still, a combination of steady volume growth and margin expansion is an enticing recipe. In tough economic times, when investors (like me) have been bitten hard by multiple price contractions at former highfliers like Starbucks, the type of momentum Unilever is demonstrating looks pretty attractive.
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