Image source: Unilever plc
Unilever (LSE: ULVR) shares have been slow, up around 10% so far in 2026. It appears that long-term safety may be back in vogue as high-risk tech stocks have been volatile. But the share price fell 3% on Thursday morning (12 February), after the full year 2025 results.
Unilver reported sales growth of 3.5%, with a 1.5% drop in actual volume growth. Of that, the company’s ‘Power Brands’ led the way with growth of 4.3% – and increased by 2.2%. But the income has decreased slightly, due to movement and disposal of money.
We have seen an estimated 0.7% increase in basic earnings per share (EPS) and improved margins since the ice cream business was divested. Magnum Ice Cream Company. Magnum reported a 20% drop in operating profit on the same day – even though it faced significant divestment and restructuring costs.
What does this mean for shareholders?
Cash prizes
A gross margin of less than 20% contributed to €5.9bn in free cash flow. As a result, the quarterly dividend was increased by 3%. And the board launched a new share buyback plan of 1.5 billion euros.
Unilever has been refocusing on core products and streamlining its business over the past few years. And it looks like it’s paying off. CEO Fernando Fernandez highlighted the target “prioritizing key segments and digital commerce, and strengthening our growth in the US and India.” And he added: “Despite the slow markets, our sharp focus and systematic execution support our confidence in 2026 and beyond..”
So what should we expect in 2026? Management guidance indicates underlying sales growth between 4% and 6% for the year, based on at least 2% volume growth. And we have to wait”modest improvement” in annual operating income.
Overall, I rate this as a solid performance during stressful market conditions.
The value proposition?
Unilever shares have gained an incredible 27% over the past few years. And that seems to have put a defensive premium on the stock now. EPS of 268p gives us a price-to-earnings (P/E) ratio of 20 for the most recent year — well ahead FTSE 100 long term average. And that’s for a stock with an average dividend yield of just over 3%.
The forecast for earnings growth in this type of business is very modest, even if it is good in current conditions. But it doesn’t look likely to lower the P/E over the next few years.
My biggest fear right now is that Unilever’s shares are perhaps looking completely valuable – or perhaps a little too toppy. And we may be at a standstill, especially if the ‘flight to safety’ among investors should subside as today’s economic turmoil takes hold. I suspect that’s why the income deposit caused the results to fluctuate this morning.
This is not to say that I do not rate Unilever as an investment. I still do, and I think new ISA investors should consider it a relatively safe base for a long-term portfolio.
