NEW YORK (TheStreet) –- Signs that the economy is getting better each month, coupled with an improved labor market, mean that Unilever NV (UN) customers have more money to buy the company's products. These developments, along with lower oil prices, should bode well for Unilever's earnings results Tuesday and into 2015.
The market has begun to pay attention.
Unilever stock lost 3% in 2014, but has started the new year strong. Its shares closed Friday at $40.65, up 1.55%, putting its 2015 gains at 4%. This compares with declines of 1.75% and 1.92% in the Dow Jones Industrial Average (DJI) and in the S&P 500 (SPX) , respectively.
And Unilever's shares have only just begun to gain momentum.
Like Procter & Gamble (PG - Get Report) , another conglomerate, Unilever has begun to focus on higher margin and higher growth markets, specifically its home care and personal care products. The latter accounts for 36% of its sales. But due to weak volumes, the company is slowly exiting its food business, which, despite making up 27% of its sales, has the lowest margins.
Over the past couple of years, Unilever has sold off brands like Slim-Fast, Ragu pasta sauce and Wish-Bone salad dressing. Unilever's business is becoming simpler to understand, not to mention more profitable.
The company is expecting higher sales in its personal care and home care products as more money enters consumers' pockets. And that's where investors should be patient.
Another growth driver for Unilever is its large presence in emerging markets, which account for 60% of its revenues. It's grown revenue from those regions at an annual rate of 9%, meaning that its consumer goods business is well-positioned against the likes of Kraft (KRFT) , Mondelez (MDLZ - Get Report) and Procter & Gamble.
On Tuesday, investors will learn the extent of Unilever's business transitions and how the company will benefit from consumer spending when it reports its fourth-quarter and full year 2014 earnings and issues forward guidance.
Research firm eMarker is predicting global retail sales will reach $28.3 trillion in the next three years, and Unilever should be one of the beneficiaries of that growth.
Analysts expect Unilever to deliver full-year earnings of $1.99 a share on revenue of $57.66 billion. This would represent year-over-year declines of 5% and 13%, respectively. But as noted, Unilever is exiting its foods business, which will impact the year-over-year declines.
Finally, the effect of low gas prices and the impact it may have on consumer spending still has not been felt. At some point it will be, and this too makes Unilever a solid long-term investment -- one that pays a dividend yield of 3.71%.