Kepler Cheuvreux has downgraded Unilever (LON:ULVR) from Buy to Hold, arguing that recent share price gains have reduced prospective upside. The brokerage nonetheless nudged its price target higher to 5,900p from 5,800p in the update.
Analyst Karel Zoete highlighted the strength of the stock since the company separated its Magnum business, noting a roughly 22% total return in the two months since the spin-off in December. Zoete wrote in a Tuesday note that "Following a 22% total return in two months since the spin-off of Magnum in December, the stock now trades around 10% above its long-term EV/EBIT(DA) averages."
Kepler's commentary recognises improvements in Unilever's operating shape and points to the consumer staples sector's defensive characteristics, stating: "We acknowledge that Unilever is in a better shape than in years, and the sector is an AI safe play, but we think that risk-reward is better balanced after the rerating." The analyst added that he sees "better value elsewhere" within the European fast-moving consumer goods (FMCG) universe.
The downgrade follows Unilever's recent full-year results, which marginally beat expectations. Results showed continued volume growth ahead of key peers and accompanying margin expansion. Management provided guidance for 2026 of 4-6% like-for-like (LFL) growth together with a small margin increase, a set of assumptions Kepler describes as meeting market expectations.
Despite the upbeat guidance, Zoete cautioned that investors should not expect immediate upward revisions to consensus forecasts. Kepler and the broader market are modelling roughly 2% volume growth and about 4% LFL sales growth for 2026.
Looking toward the near term, Zoete indicated he does not view the first quarter as likely to trigger earnings upgrades, pointing to demanding comparison bases across the Americas and Europe. Valuation considerations were central to the call: since the Magnum spin-off on 8 December 2025, the shares have returned about 22%, and now trade at approximately a 10% premium to long-term EV/EBIT and EV/EBITDA multiples while being broadly in line with a long-term price-to-earnings (P/E) of 19x.
Kepler notes that, on its revised target price of 5,900p, Unilever would be trading above a 20x P/E. Summing up the move, Zoete concluded that after the rerating, "the near-term upside is not sufficient to sustain our Buy rating."
Context and implications
- Unilever's stronger stock performance since the Magnum spin-off has materially tightened the margin for upside, prompting a reassessment of the stock's investment case.
- Management's 2026 guidance aligns with market expectations but is not viewed by Kepler as a source of immediate upgrades to consensus estimates.
- Valuation - rather than operational underperformance - is the primary driver behind Kepler's downgrade to Hold.