Unilever's Disappointing Earnings: Is There Reason for Hope?

Unilever's (LON:ULVR) disappointing earnings report is being counterbalanced by positive underlying factors, including the potential removal of unusual expenses that reduced statutory profit by €2.1b. This could lead to improved profitability in the future. Statutory profit understates earnings potential, but earnings per share fell last year. Investors should consider other factors such as risks and high return on equity.

Unilever's (LON:ULVR) earnings report for the second quarter of 2025 presented a mixed bag of results, with strong underlying factors offsetting disappointing earnings. The company reported an underlying sales growth of 3.8% in Q2, contributing to a 3.4% growth in the first half of the year [1]. This growth was driven by robust market share gains in developed regions, particularly North America and Europe, as well as improvements in emerging markets, notably Asia Pacific and India.

However, the company's earnings per share (EPS) fell last year, partly due to unusual expenses that reduced statutory profit by €2.1b. Unilever's guidance for the full year anticipates a 3% to 5% underlying sales growth, with an operating margin improvement, particularly in the second half, driven by volume growth and productivity enhancements [1].

The company's Power Brands, which account for over 75% of turnover, grew by 3.8% in the first half, with notable performances from Vaseline, Liquid IV, Nutrafol, and Magnum. The Ice Cream division grew 5.9%, with a strong performance from Magnum, and is on track for a demerger in November, with Unilever retaining a 20% stake [1].

Despite these positive developments, the company faced challenges in Latin America and China, with a volume decline of 4.6% in Latin America due to pricing actions caused by currency movements. The operating margin declined by 30 basis points due to increased brand investments, with the underlying operating margin at 19.3% [1].

Investors should consider other factors such as risks and high return on equity when evaluating Unilever's performance. The company's earnings announcements can significantly impact its stock price, with recent reports showing price changes ranging from -5.38% to +4.49% [1].

References:
[1] https://www.tipranks.com/stocks/ul/earnings