Unilever Shares Upgraded To Outperform At RBC

In a report published Monday, analysts at RBC Capital Markets upgraded

from Sector Perform to Outperform, The price target has been raised from €39 to €44. The company's revenue growth and market share in three of its four categories have improved since the new management took over in 2009. Unilever's EBIT margin has also been growing each year since 2011, without the crazy A&P fluctuations that were typical of the "old" Unilever. "Working capital has improved too, largely as a result of the number of days payable increasing by almost 50% (or 65 days) since 2008. There has not, however, been any meaningful improvement in the conversion of earnings to cash flow, a function of increased capital expenditure outstripping depreciation," the analysts said. In line with the analyst expectations, the company also expects to see a modest increased depreciation/sales ratio, after give years of high capital expenditure. The company also expects its capex to return to 2.5-4.0 percent of sales. This should then lead to an improvement in cash conversion. According to RBC Capital Markets, "Unilever is still some way from being best in class, but its evolution from worst in class has not been fairly reflected in its share price in our view."