Unilever (NYSE:UL) shares rose more than 2% intra-day today after Bank of America double-upgraded the stock from Underperform to Buy, citing improved growth prospects and market positioning. The investment bank projects Unilever’s organic growth to achieve a compound annual growth rate (CAGR) of 4.6% from 2024 to 2027, driven by a favorable product mix and increased market share.
This growth trajectory is expected to boost Unilever’s EPS CAGR to 10% for 2023-2026, compared to just 1.5% between 2020-2023. A key element of this upgrade is the anticipated separation of Unilever’s Ice Cream business by 2025, which Bank of America sees as a catalyst for Unilever to focus on higher-growth categories, enhancing both returns and cash flow.
The Ice Cream division is forecasted to trade at around 10 times its estimated 2025 EBITDA, and the separation could also reduce risks if the business underperforms. Meanwhile, Unilever’s remaining operations, dubbed “RemainCo,” are expected to outperform industry averages with superior margins, higher growth rates, and a 250 basis point advantage in EPS CAGR.
Bank of America also underscores Unilever’s focus on its “power brands” and innovation-led strategies as key drivers of future volume growth and improved performance across its portfolio.