Unilever - Brand Names at a Value Price

Unilever (UL & UN) recently popped up on one of the value screens that I follow, and I was a bit surprised that this brand name giant might be selling for a discount price. Then this morning I spotted several news items concerning Unilever, and they didn't sound very promising. They all revolved around a news release by Unilever that revises their earning guidance down from double digit to single digit growth for the year. The cause for the slow down was blamed on poor weather in Northern Europe this summer and weaker consumer confidence in Western Europe. Mr. Market was not happy at all with that announcement and sent share prices down over six percent this morning. Could this possibly be our first fat pitch to come over our plate? Let's take a closer look.

Business Basics
My first stop was over to Unilever's investor relations center to learn a little more about this large European consumer products conglomerate. I was a bit amazed at the number of high quality brand names in Unilever's stable of products. Here are a few of their many (400 plus) high quality brands:

• Hellmann's
• Knorr
• Wishbone
• Bertolli
• Becel
• Country Crock
• Slim*Fast
• Lipton
• Breyers
• Ben & Jerry's
• Klondike
• Popsicle
• Birds Eye
• Snuggle
• Surf
• Dove
• Pond's
• Suave
• Close Up
• Calvin Klein fragrances

Many of these strong brands dominate their product sector and command premium prices. Unilever's global brands provide the company a major competitive advantage against new entrants in the market.

The company appears to be free of any major legal problems.

Unilever does have substantial pension obligations. They are accounted for using reasonable assumptions. There is also the accounting of stock options, which thankfully have been expensed and are fully included in the financial statements. This is a good indicator that the company practices good conservative accounting.

Return on invested capital has improved from 2002, where it was 9.8%, and in 2003 was 12.5%.

There is still quite a bit more to write about, but I'm out of time. I'll continue the discussion later today. However, I plan on buying this stock this morning while the price is still a bargain.