Volume recovery validates transformation progress; Unilever Outperform rating maintained

Overview

The report believes that despite Unilever's management changes over the past two years, Magnum-related matters, and disruption from the sale of the Food business, the company's longer-term operational transformation is working. The core evidence is the continued improvement in volume growth, which is clearly ahead of peers in a consumer staples industry that broadly lacks a volume recovery. Bernstein believes that execution improvements in the Home and Personal Care business are not mainly driven by one-off factors, so investors may gradually shift their attention from the volatility around Food business transactions over the next roughly nine months to fundamental improvement.

Core views

First, volume is the most critical validation metric in the current consumer staples industry, and Unilever's volume growth in the second quarter, over the past year, and over the past ten quarters all shows continued improvement. Second, only about 20 basis points of the second quarter's 5.5% volume growth came from the shift in Prime Day timing, while supply chain advantages and improved execution in the Home and Personal Care business better explain the remaining growth. Third, the company's performance is more notable relative to peers such as P&G, PepsiCo, Mondelez, and Diageo, which are facing volume pressure. Fourth, Food business transactions may cause short-term volatility, but this is not enough to negate the overall transformation trend. Fifth, the institution raises its 2026 organic growth forecast while only modestly lowering forecasts for sales, operating margin, and earnings per share, continuing to maintain a positive investment view.

Analysis framework

The report centers on volume growth trends, comparing Unilever's quarterly, past-year, and past-ten-quarter performance with global consumer staples peers; it then disaggregates potential one-off effects such as the shift in Prime Day timing and supply chain volatility, and combines this with operating execution in the Home and Personal Care business to make a fundamental assessment. At the same time, the report updates 2026–2028 forecasts for sales, organic growth, operating profit, margin, earnings per share, and free cash flow, and compares them with Visible Alpha consensus expectations. Valuation uses a forward EV/EBITDA multiple methodology.

Methodology notes

• Relative valuationEV/EBITDA valuation method

  Match the target enterprise value with forward EBITDA forecasts, and derive the equity target price after deducting or adding relevant equity adjustments.

  Bernstein applies a 12.8x EV/EBITDA multiple to ULVR.LN, based on a forward NTM+1 EBITDA forecast of EUR 12,015, and adjusts for minority interests in certain emerging-market businesses to arrive at a GBp 5,800 target price.

• Operating trend analysisVolume growth and peer comparison

  Assess the quality of growth and whether operational improvement is sustainable through cross-quarter volume trends and horizontal peer comparisons.

  The report focuses on comparing Unilever's volume growth in the second quarter, over the past year, and over the past ten quarters, using weak volume growth at multiple consumer staples companies as a reference.

• Earnings forecastsForecast revisions and consensus comparison

  Update core financial forecasts and compare them with the previous model and market consensus expectations to measure fundamental changes and expectation gaps.

  The report updates 2026–2028 forecasts for sales, organic growth, operating margin, earnings per share, and free cash flow, and compares them with Visible Alpha consensus expectations as of 2026-08-03.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ULVR.LN

  Core covered name, Unilever's London-listed shares

  Strengths

  Volume growth leads most consumer staples peers, execution in the Home and Personal Care business has improved, supply chain capabilities are relatively strong, and medium-term organic growth forecasts are above consensus expectations.

  Weaknesses

  Operating performance has been relatively weak over the past many years, and the company still faces uncertainty from recent management changes and portfolio adjustments, while earnings forecasts have improved only modestly.

  Comparison

  Compared with peers such as P&G, PepsiCo, Mondelez, and Diageo, which are under pressure in volume growth, Unilever's recent volume recovery is more notable.

  Risks

  Volatility from Food business transactions, slowing emerging-market economies, organizational restructuring delivering less impact than expected, rising restructuring costs, and deterioration in competitiveness.

• UNA.NA

  The same company's listed shares in the Dutch market

  Strengths

  Shares Unilever's volume recovery, improved operating execution, and advantages from its global brand portfolio.

  Weaknesses

  Fundamental risks are the same as for ULVR.LN, with additional impact from exchange-rate translation when denominated in euros.

  Comparison

  The EUR 66.90 target price is converted from ULVR.LN's GBP 58.00 target price, and the economic interest corresponds to the same company.

  Risks

  Risks from company operations, Food business transactions, emerging-market growth, restructuring costs, competitiveness, and exchange-rate fluctuations.

Key data

• Second-quarter volume growth5.5%Prime Day's move from the third quarter to the second quarter contributed about 20 basis points.
• Average volume growth over the past year3.1%Indicates that growth was not driven by a single quarter alone.
• Average volume growth over the past ten quarters2.7%The statistical period begins after former CEO Jope stepped down.
• 2026 organic growth forecast4.8%Raised by 54 basis points versus the old model and above Visible Alpha consensus expectations of 4.7%.
• 2027 organic growth forecast4.9%About 74 basis points above Visible Alpha consensus expectations of 4.1%.
• 2028 organic growth forecast4.9%About 78 basis points above Visible Alpha consensus expectations of 4.1%.
• 2026 underlying diluted EPS forecastEUR 3.22The previous forecast was EUR 3.23, about 0.3% below consensus expectations.
• 2027 underlying diluted EPS forecastEUR 3.44The previous forecast was EUR 3.45, about 0.2% below consensus expectations.
• ULVR.LN target priceGBp 5,800Based on a 12.8x forward EV/EBITDA valuation.
• ULVR.LN current price and upsideGBp 4,743; 22%Current price as of 2026-07-31.
• UNA.NA target priceEUR 66.90Derived from the GBP 58.00 target price converted at the exchange rate.

Impact & implications

If volume growth and execution improvements in the Home and Personal Care business continue, the market may upgrade its assessment of Unilever's medium-term organic growth quality and transformation credibility, while gradually downplaying the short-term uncertainty caused by Food business transactions. The current target price implies about 22% upside, indicating that the institution believes fundamental improvement has not yet been fully reflected in the share price. However, earnings forecasts have not been raised significantly in tandem, suggesting that the short-term investment thesis depends more on growth quality, execution sustainability, and valuation rerating than on a notable near-term uplift in profit forecasts.

Risks

• Emerging-market economic growth falls short of expectations.
• The new organizational structure fails to deliver the expected operational improvement.
• Special charges or restructuring costs increase in scale.
• Competitiveness continues to deteriorate or fails to improve.
• Food business transactions cause operational or market sentiment volatility over the next roughly nine months.
• If the recent strong volume growth includes a larger-than-expected one-off component, its sustainability may be overestimated.

What to watch

• Whether volume growth can be sustained in subsequent quarters and validate the durability of the strong second-quarter performance.
• Underlying volume contribution excluding the shift in Prime Day timing and supply chain disruptions.
• Whether execution improvements in the Home and Personal Care business continue to expand to more categories and regions.
• Progress, timetable, and financial impact of the sale of the Food business.
• Whether 2026–2028 organic growth can reach the forecast range of 4.8% to 4.9%.
• Whether operating margin, earnings per share, and free cash flow can improve alongside revenue growth.
• Changes in emerging-market demand, the competitive landscape, and restructuring costs.