Last week, the world’s third-largest FMCG company Unilever Plc (NYSE: UL) caught the market’s attention by acquiring GROM, a premium gelato (Italian style ice cream) business that has more than 60 shops across the globe. Even though the business would be run as a standalone enterprise, the market pushed the share price to a new 12-month high of $48.97. A close look at the developments relating to the company revealed that there are several other reasons for the bullishness in the share price. On Monday, Unilever closed at $47.01, up to $0.59 or 1.27% from the previous close.
The London-based company reported a fiscal 2016 second-quarter revenue of Euro 13.735 billion, down from Euro 14.187 billion in the similar period last year. Excluding the 8.1% negative impact of exchange rate, 0.2% negative impact of disposals, and 0.9% positive impact of acquisitions, the maker of Ben & Jerry’s ice cream reported an underlying sales growth of 4.7%. The analysts’ surveyed by Bloomberg anticipated underlying revenue growth of 4.5%.
Unilever is also one of those few companies which are expected to gain from the UK’s exit from the EU. The decline in the exchange rate of the Pound is expected to boost the earnings of the company. The company earns 90% of its revenue from business outside the UK. Through cost-cutting measures and lower advertisement spending, Unilever recorded a 50 basis point increase in the profit margin to 15% in the first half of 2016.
The maker of Lipton tea and Dove soap re-affirmed its fiscal 2016 revenue growth outlook in the range of 3% to 5%. Graeme Pitkethly, the CFO of Unilever also stated that the company would record a 0.3% to 0.4% increase in the profit margin in the second half of fiscal 2016.
In its endeavor to increase top-line growth, the company continues with its acquisition spree. On July 20th, Unilever acquired male grooming business Dollar Shave Club (DSC) for $1 billion. Established in 2012, the Venice, California-based DSC recorded a turnover of $150 million in 2015. DSC is on course to achieve a turnover of $200 million in 2016. The acquisition would enable Unilever to strengthen its product lineup in the male grooming business. Thus, fundamentally, the share price is expected to stay upbeat in the current quarter.
The chart indicates strong support for the stock at 46. Minor resistance exists at 49, while major resistance is expected at 53. The MACD indicator continues to stay above the zero line, thereby indicating bullishness in the counter.
So, a binary trader can mull at the possibility of purchasing a one-touch call option with a target price of $53 or lower. To heighten the chances of success, the trader should choose an expiry date in the second week of October.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
