BofA resumes Unilever stock coverage with buy rating, $72 target By Investing.com

BofA Securities resumed coverage on Unilever with a Buy rating and a $72 price target, implying upside from the current $58.33 share price. The firm highlighted a 15.4x 2026E P/E, a 0.28 PEG ratio, and expected 6.6% EPS CAGR in 2027-2028 versus 6.4% for peers, while noting a potential rerating from the Foods separation and a possible U.S. listing. The article also references a recent Q4 2025 revenue miss at $12.59B versus $15.95B expected and mixed analyst views, which tempers the overall positive tone.

Analysis

The setup is less about one analyst upgrade and more about a potential regime change in how the market prices Unilever: if the Foods separation progresses, the remaining business should screen as a cleaner, higher-multiple staples compounder rather than a conglomerate with drag from lower-growth categories. That matters because staples reratings usually come from mix clarity and capital allocation visibility, not headline EPS alone; a 1-2 turn multiple expansion on a mid-teens forward P/E can do as much as several years of earnings growth. The market is currently treating the story as a crowded, low-beta defensive, which leaves room for a valuation catch-up if execution stays intact.

The second-order beneficiary is likely Ferguson, not because of direct business overlap, but because Trian-style activism is creating a playbook for domicile/multiple arbitrage: if investors believe a U.S. listing can unlock index ownership and deeper liquidity, they may re-rate other non-U.S. large caps with U.S.-comparable cash generation. That would be most visible over months, not days, as passive flows and buyback mechanics matter more than headline commentary. Conversely, Kraft Heinz is the cautionary signal: any renewed food portfolio reshuffle could pressure sector comps by reminding investors that separation value is often easier to model than to realize.

The contrarian angle is that the upside may be more muted than bulls expect because the stock is already being argued as cheap on growth-adjusted metrics, which often means the catalyst has to be structural rather than incremental. If quarterly execution remains noisy, or if the Foods deal looks like financial engineering rather than operating simplification, the discount can persist for 2-3 quarters despite “positive” coverage. In that scenario, the best trade is not a naked long, but a relative-value expression against a peer where rerating is less dependent on activism or corporate action.

Key Decisions for Investors

• Long UL / short a European staples basket over 3-6 months: target a 1-1.5 turn relative P/E re-rating if separation execution improves and activist pressure keeps the U.S. listing narrative alive; cut if the next print weakens volume/mix.
• Buy UL call spreads 6-9 months out to express rerating upside with defined risk: structure for a move toward the high-$60s/low-$70s, where multiple expansion—not EPS revisions—drives most of the payoff.
• Pair FERG long versus a U.K./EU industrial or staples name with similar cash conversion if you want to express the “U.S. listing / governance unlock” theme without paying full staple valuation.
• Stay underweight KHC on any food-sector M&A chatter for the next 1-2 quarters: the risk is that portfolio restructuring talk keeps pressure on sentiment while UL becomes the cleaner rerating vehicle.
• If UL fails to reclaim relative strength within 4-6 weeks after the coverage change, fade the move via short-dated put spreads; the thesis depends on corporate-action follow-through, not just valuation support.