Nomura Knocks Unilever, Lauds Nestle - TheStreet



) --


(UL) - Get Report

stock is edging lower after receiving a downgrade from


(NMR) - Get Report


Unilever stock is down 0.9% at $31.50.

"Although Unilever is well placed for pursuing the next 1 billion consumers, we downgrade

Unilever to reduce from buy, as we see a risk of

the second half of 2010 margins moving backwards, and heightened competition in key categories from the likes of


(PG) - Get Report

weighing," writes David Hayes, Nomura's banking analyst, in a note to investors.

Unilever is one of the parent companies of the Unilever Group, which supplies consumer goods across foods, home and personal care categories.

The Nomura research report also contains a bearish stance on European food, and home and personal care names, largely based on fundamental risks.

The report adds that M&A activity has been, and will be, a key theme for food, as well as home and personal-care names through 2010. Hayes has proposed that the M&A activity has been, and is being, driven by the need to develop a new phase of business model to ensure that current growth and incremental rates of return and the subsequent multiples and value for investors could be maintained.

He notes the step-up in the level of sizable, $1 billion plus M&A dealmaking in the second half of 2009, pointing to


( CBY) and


( KFT),

Sara Lee

( SLE) Personal Care and Unilever, as well as Kraft Pizza and


(NSRGY) - Get Report

in 2010.

Nestle says it will buy back an additional 10 billion Swiss Francs, or $9.6 billion, of stock over two years once the company's existing buyback program of 25 billion francs ends this year.

The company recently agreed to sell 52% of Alcon to Novartis after agreeing to sell 25% of the business to Novartis in 2008. Novartis recently offered to buy the remaining 23% of the business.

"We applaud the direction of Nestle," writes Hayes. "Nestle throwing the cash back at shareholders via an accelerated buyback would signal that no opportunity remains for putting this cash to use to leverage the existing global infrastructure of the company."

Hayes believes that the market forgets that companies like Nestle,





SAB Miller

and Cadbury have a track record of impressive organic expansion and strategically sound M&A.

-- Reported by Andrea Tse in New York

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Copyright 2009 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Copyright 2009 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.