Unilever Upgraded to Strong Buy - Analyst Blog

Zacks Investment Research upgraded Unilever Plc UL to a Zacks Rank #1 (Strong Buy) on Jun 21.

The company is gaining momentum on back-to-back divestitures made in the recent past. Unilever is divesting its brands and businesses in order to focus on its core portfolio to deliver sustainable growth. Unilever's core businesses comprise detergents, foods, toiletries, and specialty chemicals.

Why the Upgrade?

On May 22, this consumer products giant agreed to sell its Ragu and Bertolli pasta sauces brands, which generate sales of $600 million annually. Per the deal, Unilever will sell the ownership of its Ragu and Bertolli brand sauces to Japan's Mizkan Group for $2.15 billion. The divestiture will involve the sale of two factories - a sauce processing and packaging facility in Owensboro, KY and a tomato processing plant in Stockton, CA.

Of late, Unilever has been divesting its non-core businesses to focus its resources on the core food portfolio. In February, the company sold its meat snacks business to Berlin-based Jack Link's Meat Snacks for an undisclosed amount. Prior to that, in January, Unilever sold its Royal pasta brand to RFM Corporation, one of the biggest diversified food and beverage companies in the Philippines. In Dec 2013, Unilever sold its Soft & Beautiful, TCB and Pro-Line Comb-Thru brands in the hair care category to an international hair care company – Strength of Nature for an undisclosed amount. The sale however excludes TCB's business in Africa.

In Oct 2013, Unilever sold its Wish-Bone salad dressing business to food company Pinnacle Foods Inc. PF for $575 million, while in August, ConAgra Foods Inc. CAG bought its Bertolli and P.F. Chang's frozen meals brands for $265 million. In Jan 2013, the company sold its Skippy peanut butter business to Austin, MN-based producer of branded food and meat, Hormel Foods Corporation HRL for $700 million in cash.

These divestitures not only help the company to focus on its core portfolio, but also enable it to optimize its resources and allocate them to more promising markets.