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By Jonathan Yates

Solid growth in emerging markets shielded the second-quarter earnings of Unilever (UL) from a decline in European business. The Anglo-Dutch company’s emerging market sales rose by double digits. CEO Paul Polman says the conglomerate will continue to augment its position in emerging markets, particularly India and Indonesia.

While growth around the globe is slowing, the consumer class in emerging markets continues to expand. According to a recent study by the McKinsey Global Institute, the consumer class in emerging market cities will increase by one billion by 2025. That is roughly the equivalent of India’s population entering the middle class in little more than a decade.

London- and Rotterdam-based Unilever is well-situated to profit from the growth in emerging markets, manufacturing consumer products that include Ben & Jerry’s ice cream, Dove soap, Vaseline, Lipton tea, and Bertolli olive oil.

The expanding middle class in emerging markets has rewarded Unilever shareholders. Over the past 52 weeks of market action, the stock is up by 15.71%. Year to date it has risen 8.57%. In the past week of trading, Unilever has jumped an additional 6.25%. The trend is definitely the friend of Unilever shareholders, with the stock trading above its 20-day, 50-day and 200-day moving averages.

For a major consumer company, Unilever boasts a very healthy profit margin and return on equity. Sales growth is up by 11.50% on a quarterly basis. That’s bullish, as it’s higher than the five-year growth rate of 3.23%.

The growth in emerging market sales makes Unilever a very solid, stable blue chip. It has a low beta of 0.77, which is positive as these stocks have proved to return the most over time. In addition it offers an above-average dividend yield of 2.58% and, with ample cash flow, the ability to raise the dividend in the future. Also bullish is the low, low short float of only 0.07%. Even with the recent run-up in Unilever’s stock price, few are betting that it will fall.

Unilever is now trading around $35.70, while the mean analyst target price for the next year is $37.93. The stock is now trading very close to its 52-week high of $35.79.

Source: Emerging Market Consumers Protect Unilever Earnings