Earnings Preview: Unilever to report Q3 earnings

AMSTERDAM - Unilever NV, the maker of consumer products such as Dove soaps and Ben & Jerry's ice cream, reports earnings for its third quarter before the market opens Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Unilever has suffered during the downturn as consumers favored cheaper products over the company's more expensive name brands. Unilever responded by cutting prices, which helped keep sales volumes high and preserve market share — but ate into profits.

Chief Executive Officer Paul Polman, who took the top job at the company in January, has promised Unilever will grow sales without sacrificing profit margins further.

The bar has been set high for Unilever as major U.S. competitors like Procter & Gamble, Colgate and Kellogg all beat analyst expectations with their earnings reports last week, mostly due to better than expected sales.

An underperformer for much of the decade, Unilever has followed the trail blazed by its two largest rivals, P&G and Nestle, selling off less-known brands to focus on the winners.

Despite the downturn, Unilever made its first sizable acquisition in years in the third quarter, buying the Sanex and Duschdas soap brands from Sara Lee Corp. for euro1.28 billion ($1.88 billion).

BY THE NUMBERS: Analysts polled by Thomson Reuters on average expect Unilever to report it earned euro0.33 per share on sales of euro10.4 billion during the third quarter. In the same period a year earlier, it reported earnings of euro0.59 a share on sales of euro10.4 billion.

ANALYST TAKE: SNS Securities analyst Richard Withagen said the positives in P&G's earnings bode well for Unilever. "Top line growth continues to accelerate at Unilever," he said in an earnings preview, adding that the company will benefit from cheaper raw materials. SNS rates shares an "Accumulate."

Fernand de Boer of Petercam Bank cautioned that after a strong performance by competitors "it will be difficult to beat market expectations." He rates shares a "Hold."

WHAT'S AHEAD: Analysts will want to see evidence Unilever's margins haven't suffered further amid price cuts, and strength in sales will be key, given that Europe has lagged the U.S. in showing signs of recovery.

In addition, the company should update the market on its progress in integrating Sanex.

STOCK PERFORMANCE: Unilever shares have outperformed those of its peers this year and at euro20.67 are close to 52-week highs.

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