Mindful Money’s weekly shares watch: Unilever, Royal Mail & Laird

18th January 2016


Unilever shareholders will be hoping the firm can maintain its recent positive momentum when the Bovril and Lynx owner updates the market with its full-year results on Tuesday.

Graham Spooner, investment research analyst at The Share Centre highlighted that recent trading updates from global consumer goods giant Unilever have cheered the market as they showed an improvement in sales in emerging markets.

Its third quarter trading update in October reported showed that sales had risen 5.7%, which was ahead of expectations, with the group noting that it had seen sustainable growth in Latin America.

Spooner, who is calling the FTSE 100 firm a ‘buy’ said: “Tapping into the growing wealth of the expanding middle classes in developing countries is a key priority for the company.

“The recent slowdown in China has had an impact but luxury goods’ manufacturers have suffered more than everyday consumer goods sellers such as Unilever.”

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers believes underlying fourth quarter sales growth in the region of 4% to 5% may be reported, with emerging market growth once again outpacing developed markets.

The group, which has witnessed it shares edge ahead by 2% over the past 12 months, may also focus on product innovation and cost control.

Bowman added: “Ahead of the announcement and with tough markets pitted against lower soft commodity price tailwinds and ongoing management initiatives, analyst consensus opinion currently points towards a ‘strong hold’.”

Thursday sees delivery group Royal Mail, down 1% over the past year – and by 16% over six months – publish its third quarter trading update, which will include the all-important trading numbers for the run up to the Christmas period.

Spooner, who has the group down as a ‘hold’ said: “There remains a divergence of opinion amongst analysts with, in the last few days, two positive opinions and one sell recommendation. Areas to concentrate on will be parcel volumes, the European business and its cost saving programme.”

Bowman believes a continuation of trends reported as of its first half results could be seen. He expects that group revenue may again prove broadly flat, with growth for both its UK and European GLS parcel businesses offset by ongoing declines for its UK letters business.

He added: “The recent acceleration in its cost savings programme and subsequent increase in near term transformation – redundancy – costs may be further underlined, whilst growth and innovation initiatives such as barcoding and scanning more parcels at Mail Centres reemphasised.

“On balance and with concerns for parcel competition and staff pay negotiations set against group cash generation and a still relatively attractive dividend yield, analyst consensus opinion currently denotes a ‘weak hold’.”

The same day also sees global electronics and security systems company Laird deliver its fourth quarter trading update.

Spooner, who in line with the market consensus has the group on his ‘buy’ list, expects that will be considerable interest in this update from the FSTE 250 firm, given the recent takeover speculation which has boosted the shares, where over one year they have firmed by 9% – although over six months they are off by 11%.

He said: “In October the company said revenues were up 16% in the first nine months of the year despite the materials division being hit by weakness in the telecoms market.

“The wireless systems operation saw revenues rise 21% as it benefited from strong vehicle antenna sales. The market will also be interested in any comments about the recent acquisition of German vehicle connectivity group Novero and how that fits into its strategy.”

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