Berenberg Lowers Unilever Rating, Says Turnaround Already Priced In

Berenberg has cut its recommendation on Unilever Plc from buy to hold, arguing the consumer goods group's multi-year restructuring and recent operational improvements are largely captured in the current share price. The bank reduced its FY26 EPS forecast slightly following Unilever's full-year 2025 results, while highlighting stronger-than-expected Q4 underlying sales and elevated margins. Analysts point to remaining productivity upside of €130 million and flag several risks including potential earnings dilution from asset disposals, foreign exchange exposure in emerging markets and rising competitive pressures.

Key Points

Berenberg downgraded Unilever from buy to hold, arguing the turnaround is reflected in the current valuation.
Q4 2025 underlying sales grew 4.1% driven by 2% pricing and 2.1% volume/mix, with full-year underlying operating margin at 20% and EPS slightly above consensus; gross margin reached 46.9% in 2025.
The move impacts consumer staples equity valuations and investor expectations for multinational consumer goods firms; peer comparisons include Nestle9 and P&G.

Overview

Berenberg has downgraded Unilever Plc from "buy" to "hold," saying the market has largely absorbed the gains from the company's multi-year restructuring. The bank noted that the recent appreciation in Unilever's share price implies the turnaround is well reflected in its valuation.

Valuation backdrop

Berenberg pointed to a 12-month forward price-to-earnings ratio of 19.6x for Unilever, which it described as a 17% premium to the company’s five-year average multiple. The bank also observed that Unilever's P/E sits about 17% above its five-year average versus a basket of global staples peers, including Haleon, Beiersdorf, Colgate, Nestle9, Henkel, P&G and L'Ore9al. In Berenberg's view, that premium indicates the market has already priced in much of the company’s recovery.

Q4 and FY25 performance

Unilever reported underlying group sales growth of 4.1% year-on-year in the fourth quarter of 2025, ahead of the Visible Alpha consensus of 3.9%. The outperformance was driven by pricing of 2.0% and volume/mix improvement of 2.1%.

By business segment, Personal Care expanded 5.1% versus a consensus of 4.2%, Home Care rose 4.7% against a 3.2% consensus, Beauty & Wellbeing increased by 4.7% versus a consensus of 5.4%, and Foods grew 2.3% against an expected 2.9%.

For the full year 2025, underlying operating margins reached 20%, in line with consensus, and underlying EPS of 3.08 came in 1% above the consensus estimate of 3.05. Gross margins climbed to 46.9% in 2025, the highest level reported since 2008, while brand marketing investment was increased to 16.1% of sales - a level not seen in the past 20 years.

Guidance and Berenberg's forecast update

Unilever's management guided for organic sales growth in 2026 at the low end of its 4%-6% target range, expecting around 2% from pricing and at least 2% from volume/mix, along with a modest operating margin improvement. Berenberg said this guidance aligns with consensus expectations prior to the earnings release.

Following the full-year results, Berenberg trimmed its FY26 EPS forecast by 1.4%, bringing the projection to 3.15. The revision reflects updated assumptions on organic sales growth, currency movements and the average cost of debt.

Peer comparison and growth outlook

The analysts acknowledged Unilever's recent outperformance versus Nestle9 and P&G across several metrics over the past two years. They cited average two-year organic sales growth of 3.9% for Unilever compared with 2.8% for Nestle9 and 2.0% for P&G, and a two-year CY23-25 EPS compound annual growth rate of 9% for Unilever versus -5% for Nestle9 and 4% for P&G.

Berenberg maintains expectations that Unilever will continue to outperform peers on volume/mix and like-for-like sales growth in 2026. However, the bank noted a remaining 130 million of potential savings still to be realised from Unilever's 00 million productivity programme, a factor Berenberg says will temper the company's earnings-growth advantage over other staples names once fully accounted for.

Analysts' assessment

Berenberg described the company’s actions - divesting or separating underperforming brands and businesses, increasing investments and executing management-led changes - as having transformed Unilever into a simpler, more agile and faster-growing business compared with two to three years ago. Yet, the bank concluded that, "Following the stock's re-rating in early 2026, we believe the company's transformation is now reflected in the share price."

Risks highlighted

Among the risks Berenberg enumerated are potential earnings dilution from further disposals of businesses, foreign exchange headwinds given Unilever's nearly 60% sales exposure to emerging markets - notably India and Brazil - and the chance that intensifying competition could restrain market-share gains and lead to misses on volume growth.

Conclusion

Berenberg's downgrade to "hold" rests on the judgement that Unilever's structural improvements and recent operating momentum have been priced into the shares. While the company retains relative growth strengths and margin progress, limited remaining productivity upside and the cited external risks underpin the bank's more cautious stance.

Risks

Potential earnings dilution from further disposals of businesses - affects Unilever's profitability metrics and shareholder returns in consumer staples.
Foreign exchange headwinds tied to nearly 60% of sales coming from emerging markets, particularly India and Brazil - affects revenue and EPS volatility for multinational consumer companies.
Intensifying competitive pressures that could limit market-share gains and lead to volume growth misses - impacts sales trajectories across the packaged goods sector.

Menu

Key Points

Risks

More from Stock Markets