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What's in Store for Unilever (UN) this Earnings Season?

Unilever NV UN is set to report first quarter 2016 results on Apr 14. Last quarter, the company delivered organic sales growth of 4.9% (in local currency), driven by pricing gains of 2.9% and volume growth of 1.9%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Unilever has been delivering weak results since the past few quarters due to continued slowdown in the emerging markets, which account for about two-thirds of the company’s total revenues. Though emerging markets offer strong long-term growth prospects, they are generally volatile.

Despite these challenges, Unilever outperformed markets in 2015. In full year 2015, Unilever generated core earnings growth of 14% (in local currency), up from 11% growth in the prior year. On a constant currency basis, earnings grew 11% in the year. Revenues grew 10% in the year, driven by positive currency impact of 5.9%. This was better than a 2.7% decline last year.

Unilever delivered organic sales growth of 4.1% (in local currency) in the year, driven by pricing gains of 1.9% and volume growth of 2.1%. Volumes were significantly boosted by improvement in Latin America and strong ice cream sales as a result of warm weather and innovations in the category. The growth in ice-cream was largely driven by premium brands like Magnum and Ben & Jerry’s. Organic sales growth was better than the preceding year’s growth of 2.9%.

In the to-be reported quarter, Unilever is likely to benefit from weak commodity prices which will help improve its operating margins. Also, irrespective of economic conditions, consumption of personal care and hygiene products like soaps are recession proof.

Encouragingly, the company has managed to grow its dividend through the difficult times since 2012, raising confidence that when demand increases, investors will benefit from their holdings. Though there are deteriorating trends in Europe, Brazil and Russia and sluggish consumer demand overall, Unilever is consistently focusing on improving its products through innovation, accelerating its cost containment measures to remove unnecessary costs and simplifying the business.

Unilever holds a Zacks Rank #2 (Buy).

Stocks to Consider

The following stocks in the consumer staples sector are likely to beat earnings this season. That is because these have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3:

Kellogg Co. K with an Earnings ESP of +4.30% and a Zacks Rank #2.

Hormel Foods Corp. HRL with an Earnings ESP of +8.11% and a Zacks Rank #2.

Kimberly-Clark Corp. KMB with an Earnings ESP of +1.99% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
KIMBERLY CLARK (KMB): Free Stock Analysis Report
 
HORMEL FOODS CP (HRL): Free Stock Analysis Report
 
KELLOGG CO (K): Free Stock Analysis Report
 
UNILEVER N V (UN): Free Stock Analysis Report
 
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