Berenberg lowers target price on Unilever

(Sharecast News) - Berenberg lowered its target price on consumer goods giant Unilever from £58.40 to £50.40 on Friday following the group's first quarter sales figures a day earlier. In Q1, Unilever saw group underlying sales grow 3.8% year-on-year, above consensus estimates of 3.6%, driven by pricing of 0.9% and volume/mix growth of 2.9%.

Berenberg highlighted that Unilever's beat was driven by its home care division, which saw "strong performance" in two key markets - India and Brazil. In its other three divisions - beauty and wellbeing, personal care and foods, underlying sales growth was "slightly below consensus expectations".

However, the German bank noted that while the stock's valuation was "undemanding", a sustained re-rating in the near term could be inhibited by the pending foods division merger with McCormick, expected to be completed around mid-2027.

"Furthermore, the ongoing Middle East conflict and its inflationary effect on oil-related costs poses a risk to Unilever's growth, particularly in the emerging markets, which account for circa 60% of group sales," Berenberg said.

"Our FY26 EPS forecasts are 0.8% higher than our previous estimate, mostly driven by more favourable currency trends. Our DCF-based, 12-month price target falls to GBP50.40 (from GBP58.40) as we raise our WACC assumption from 7.9% to 8.6% to reflect the recent rise in bond yields and risks highlighted above."

Reporting by Iain Gilbert at Sharecast.com