Unilever’s Make-or-Break Moment: Portfolio Surgery Meets a Lukewarm Market

Unilever's shares lag despite strong volume growth and a sweeping overhaul, including a food division merger and €6B buyback, as investors weigh cost pressures.

The Anglo-Dutch consumer goods giant is executing one of the most radical corporate overhauls in its history, yet the stock market remains distinctly unimpressed. Unilever’s shares are trading at roughly €50.81, a full 21% below their 52-week high of €63 and well under the 50-day moving average. The disconnect between the scale of the transformation and the tepid share price tells a story of a company in transition that investors are still sizing up.

Volumes Lead the Charge, but Costs Loom

The first-quarter numbers offered a glimmer of operational strength. Organic revenue growth came in at 3.8%, marginally ahead of the 3.6% consensus estimate. Crucially, 2.9 percentage points of that came from genuine volume growth rather than price hikes, with just 0.9 points attributable to pricing. That mix is exactly what CEO Fernando Fernandez has been pushing for—less reliance on squeezing consumers and more on brand-driven demand.

Unilever’s so-called Power Brands, which include Dove, Vaseline and Hellmann’s, delivered organic growth of 5.0%. But the cost backdrop is turning hostile. Brent crude is hovering near $110 a barrel, threatening to push up logistics and production costs in the months ahead, potentially eating into the margin gains from the portfolio shake-up.

The Great Unbundling

The centrepiece of the strategy is the planned separation of Unilever Foods. The division, home to brands like Knorr and Hellmann’s, is being merged with US spice giant McCormick & Co. to create a global food portfolio worth $20 billion in annual sales. The deal is expected to close by mid-2027.

What remains will be a pure-play health and beauty powerhouse, focused on the higher-margin segments of Beauty, Wellbeing and Personal Care. That rump business generates roughly €39 billion in revenue. The ice cream unit has already been spun off and now trades independently as The Magnum Ice Cream Company.

Some market participants have voiced scepticism about executing such sweeping structural changes in an uncertain macroeconomic environment. The risks are real, but so is the potential reward: Unilever is betting that a leaner, more focused portfolio will unlock value and accelerate growth.

Cash Returns Take Centre Stage

The proceeds from the restructuring are being channelled directly back to shareholders. A €1.5 billion share buyback programme kicked off in late April, with Morgan Stanley executing weekly purchases on behalf of the company. That programme is scheduled to run until July 2026.

Looking further ahead, a much larger €6 billion buyback is planned for the 2026-2029 period. On the dividend front, the quarterly payout has been raised by 3% to €0.4664 per share. The record date for the next payment is 15 May, meaning investors holding the stock on that day will qualify.

Valuation and the Waiting Game

At current levels, Unilever trades on a price-to-earnings multiple of roughly 11.8, a level that suggests the market is pricing in considerable execution risk. Analysts remain predominantly on the sidelines with "hold" ratings, waiting for tangible evidence that the restructuring will translate into sustainable margin expansion.

For the full year 2026, management has stuck to its guidance for organic revenue growth at the lower end of the 4% to 6% target range. Whether that will be enough to shift sentiment depends heavily on how quickly the McCormick deal gains regulatory clarity and whether cost pressures can be kept in check.

The annual general meeting is fast approaching. Shareholders have until 11 May to submit their voting forms, with the strategic direction of the company—and the fate of the foods division—topping the agenda. For now, Unilever is doing what it promised: reshaping the portfolio and rewarding investors. The market is simply waiting to see if the numbers add up.