Unilever shares soar on strong H1 results, margin expansion

Investing.com -- Unilever (AS: ULVR) shares surged on Thursday after the consumer goods giant reported a strong first half of 2024, beating market expectations. The company reported underlying sales growth of 4.1%, driven by both volume increases and pricing strategies.

Unilever's Power Brands, which contribute approximately 75% of turnover, spearheaded this growth with a 5.7% rise in underlying sales. The company's focus on fostering high-quality sales growth and expanding gross margins has yielded positive outcomes.

Gross margin improved by 420 basis points to 45.7%, bolstered by volume leverage, optimized product mix, and increased productivity gains.

Analysts from RBC Capital Markets in a note said that Unilever has raised its full-year EBIT margin guidance to "at least 18%", implying an EBIT upgrade of at least 5% compared to current consensus. This optimistic outlook is supported by enhanced investments in brand marketing, which rose by 180 basis points in the first half.

However, RBC maintains a cautious stance on Unilever's competitive position. Despite a modest improvement in second-quarter volumes, the company's turnover-weighted market share remains “largely unchanged”, indicating persistent challenges.

Unilever generated strong free cash flow of €2.2 billion and returned value to shareholders through a 3% dividend hike and share buybacks.

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