Unilever stock is set for huge drop on the Trinidad & Tobago Stock Exchange
Unilever shareholders face a torrid time as very poor profit result in 2017 drove the stock price vastly lower than in 2016 and the price is poised to sink even lower as profits for the year cannot support the relatively high stock price.
Unilever profit peaked in 2013 and declined each year since but the stock price kept on rising and peaking in December 2015 at $68.30. Infrequently traded, the stock has been on a slide from 2016, but limited trading and the deep fall in profit made the downward price adjustment long and drawn out as many investors don’t like taking losses, hoping that tomorrow will be better.
Profit of Unilever Caribbean has almost evaporated in 2017.
Unilever reported profit of $3 million for the June quarter or 11 cents per share and $6.8 million for the half year suggesting profit around 60 cents for the full year but the September quarter saw profit falling to just $169,000 with year to date profit of $7 million compared to $30 million for the nine months to September 2016. Full year results are unlikely to exceed the $7 million mark by much. The earnings per share which is 27 cents at September should end the year around 30 cents. The stock which last traded at $38.75, is priced at a PE ratio around 130 times 2017 earnings, the clearest indication of a huge fall in the price to come.
Profit peaked at $70 million in 2013 slipped in 2014 to $47 million in 2015 and $42.5 in 2016 and looks set to plummet in 2017 as indicated above as revenues has fallen sharply during the year. Fortunately, the company cut back on cost in the September quarter with administrative expenses falling from $7 million to $5.5 million and selling and distribution cost was $8 million lower than in 2016.
Revenues reached a high of $588 million in 2014, dipped to $549 million in 2015, recovered a bit in 2016 to $566 million and is set to hover under $500 million for 2017, with nine months inflows of $410 million and $109 million for the quarter compared to $136 million in 2016. To be fair to the company, the impact of hurricane on some of the countries they sell to affected sales in the latest quarter, making an already bad situation worse.
Part of the austerity plan effected was a cut in dividend which was slashed from a high of $1.95 in 2013 it fell to $1.77 in 2014 then to $1.20 in 2015 and rose modestly to $1.25 in 2016.
Investors should keep a keen eye on the stock when it hits a low under $20 that it seems to be heading for as it could then present a good opportunity for recovery when the time is right.
