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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Unilever PLC    ULVR   GB00B10RZP78

UNILEVER PLC

(ULVR)
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Wanted: signs of V-shaped recovery in earnings reports

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07/14/2020 | 01:39pm EDT

(In JULY 14 story, corrects currency conversion, paragraph 7)

* Q2 earnings expected to drop more than 50%

* Stocks valuations on the rise

* Investors eager for outlooks

LONDON, July 14 (Reuters) - Equity investors are no longer losing sleep over the short-term hit to company earnings from coronavirus lockdowns, instead they are looking for early evidence to support the V-shaped recovery narrative that has lifted stocks out of their mid-March crash.

As Europe Inc starts churning out trading updates expected to show a more than 50% dive on average in second-quarter profits, many investors are keen to see whether the market bounce back can be sustained.

European stocks have on average risen a whopping 36% from March 16 lows sending their valuations soaring to over 17 times their projected annual profits, well above the historic average of 14 according to Refinitiv data, indicating investors are happy paying a premium to buy stocks despite the uncertainty.

Many companies pulled their guidance during the peak of the coronavirus crisis, leaving investors in the dark for the rest of the year, prompting them to write off the first-half of 2020.

"One of the things that we're watching for most closely is those companies that did withdraw guidance, do they now feel that they have enough visibility to return (to) giving guidance", said Sunil Krishnan, head of multi-asset funds at Aviva Investors."

Flying blind into the earnings season, investors are eager to get a concrete sense of how companies are coping on the ground.

"We will be looking at what are the trends in terms of demand, what are the trends in terms of companies' ability to preserve cash during this lockdown", said Kasper Elmgreen, head of equities at Europe's top asset manager Amundi with 1.53 trillion euros ($1.75 trillion) in assets under management.

Rather than basing an investment decision on a company's earnings beating consensus, investors say they will focus on the outlook provided in press releases, press conferences and analyst presentations.

UBS analysts also stressed the importance of improved visibility.

"What is more important ... is how the corporate sector views the outlook, the strength of the recovery in regions that have already exited lockdown and what impact the government measures are having on costs," they said in a note.

Last week, SAP said its revenues rose 2% with business activity gradually improving in the second quarter. Shares in the German software maker, which kept its full year outlook, rose 6% on the day to a record high.

Mercedes Benz maker Daimler, Unilever and Philips are some of the big European blue-chips reporting earnings next week.

The latest data from Refinitiv on July 14 showed analysts expect on average profits from companies listed on the pan-European STOXX 600 to fall 56.2% year-on-year in the second-quarter.

Market mavens however believe there is a big margin for error in second-quarter estimates, given analysts in many cases had no precise outlook to factor into their estimates.

They argue there is a greater chance of companies beating market estimates during the quarter as the dire expectations were set at the height of the coronavirus crisis, but a spike in economic activity in June should have helped lessen the blow.

"We are convinced that the extraordinary fiscal plan implemented worldwide will help earnings to recover quicker than market and analyst expectations and will reinforce the V-shaped recovery in the coming months," Guilhem Savry, head of macro and dynamic allocation at asset manager Unigestion said in a note to clients.

While Refinitiv consensus points to earnings quickly starting to grow again from the first quarter of 2021 by 36.8%, it's in part due to the easy comparison in January-March 2020 when profits slumped 38.2%.

At best earnings are expected to go back to pre-coronavirus levels by 2022. ($1 = 0.8770 euros)

(Julien Ponthus and Joice Alves; editing by Emelia Sithole-Matarise)

Stocks mentioned in the article
ChangeLast1st jan.
AMUNDI -0.47% 63.85 Real-time Quote.-8.66%
DAIMLER AG 2.80% 40.155 Delayed Quote.-18.67%
KONINKLIJKE PHILIPS N.V. -0.64% 44.595 Delayed Quote.4.55%
SAP SE -1.61% 135.32 Delayed Quote.12.47%
STOXX EUROPE 600 -0.07% 363.39 Delayed Quote.-12.55%
STOXX EUROPE 600 NR -0.07% 796.69 Delayed Quote.-11.17%
UBS GROUP AG 0.96% 11 Delayed Quote.-10.88%
UNILEVER PLC 0.06% 4667 Delayed Quote.7.28%
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Financials
Sales 2020 50 787 M 59 939 M 59 939 M
Net income 2020 5 950 M 7 022 M 7 022 M
Net Debt 2020 22 736 M 26 833 M 26 833 M
P/E ratio 2020 23,2x
Yield 2020 3,22%
Capitalization 134 B 158 B 158 B
EV / Sales 2020 3,09x
EV / Sales 2021 2,97x
Nbr of Employees 149 867
Free-Float 55,7%
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 53,00 €
Last Close Price 51,02 €
Spread / Highest target 23,5%
Spread / Average Target 3,89%
Spread / Lowest Target -21,6%
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Alan Jope Chief Executive Officer & Executive Director
Nils Smedegaard Andersen Chairman
Nitin Paranjpe Chief Operating Officer
Graeme David Pitkethly Chief Financial Officer & Executive Director
Richard Slater Chief Research & Development Officer
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