My Unilever shares have dropped 6.6% on today’s sorry results – time to get rid?

Harvey Jones wasn’t happy to see his Unilever shares had taken a beating this morning. He wasn’t particularly impressed with the FTSE 100 stock anyway.

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I’ve been underwhelmed by my Unilever (LSE: ULVR) shares since buying them in 2023 and 2024. Last night, I was sitting on a modest 12% gain and wondering whether I’d find more excitement elsewhere.

When I discovered the Unilever share price had fallen 6.6% this morning I was even less impressed. I’ve got no cash in my trading account. Is dumping Unilever the best way to raise it?

On checking, today’s full-year results weren’t quite as bad as I feared. The FTSE 100 consumer goods giant reported a 12.6% rise in annual profit to €11.2bn, plus a €1.5bn share buyback programme. What’s the problem?

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Am I wasting my time with this FTSE 100 stock?

Underlying sales growth came in at 4%, just shy of the 4.1% expected by analysts. Not exactly a disaster, but when a company like Unilever misses modest expectations, investors tend to flip.

The board also warned of a “subdued” first half of the year before things (hopefully) pick up, driven by price increases as higher commodity costs filter through in 2025. 

Unilever has long been a go-to defensive stock. It owns some of the world’s biggest consumer brands that are in millions of homes globally, providing a steady stream of revenue even in uncertain economic times.

Checking performance, I see the Unilever share price has actually climbed 19% over the last year. And that’s after today’s dip. So maybe I’m the one flipping for no reason. However, it’s up just 2% over five years. Performance has been surprisingly volatile for a supposedly defensive stock.

Created with Highcharts 11.4.3Unilever PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Unilever took its eye off the ball in that time. It became too big, too sprawling. CEO Hein Schumacher has restored focus but I wouldn’t call him transformative.

Also, I worry about the group’s long-term sales trajectory. Even in a good year, revenue growth is modest. 

Growth prospects look modest

Management is guiding for growth of between 3% and 5% in 2025. That’s in line with its historical performance but hardly inspiring. Rivals like Nestlé and Procter & Gamble have grown faster lately.

Then there’s the demerger of its ice-cream division, home to brands like Ben & Jerry’s and Magnum. While this move could unlock value in the long run, it also adds an element of uncertainty. It’s another distraction for management. 

Unilever remains a high-quality company with strong brands and a defensive edge. The dividend yield of 3.3% is decent, but hardly spectacular. Today’s price-to-earnings ratio of just over 21 doesn’t exactly scream bargain.

The 21 analysts offering one-year share price forecasts for Unilever have produced a median target of just over 5,032p. If correct, that’s an increase of around 13% from today. These forecasts would have been produced before today’s dip. They were even lower before.

For now, I’m holding. I don’t want to crystallise a sharp one-day loss. Unilever is likely to recover as bargain seekers emerge. But if an irresistible buying opportunity emerges in the weeks ahead and I still don’t have the cash, Unilever is top of my Sell list.

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Unilever. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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