Shares of Unilever PLC ( UL - Analyst Report ) have been rising since this consumer products giant posted healthy third-quarter results, including underlying sales growth of 5.9%. In addition, this Zacks #1 Rank (Strong Buy) reached its 52-week high of $32.96 on December 12. With rising estimates and potential long-term earnings growth of 4.9%, UL looks to be a solid momentum pick.

Solid Third Quarter Beat

On October 25, Unilever reported third quarter underlying sales growth of 5.9%, driven by both volume and pricing gains despite high input costs and a tough currency environment. Increased investment in innovation and brand building also contributed to the growth.

Organic sales in the emerging markets improved as well, with new product innovations and consistent market share in the industry. Emerging market sales grew 12.1%.

Moreover, the company expects to deliver strong volume gains, improved operating margins and solid free cash flow in spite of the uncertain economy.

Earnings Estimates Improving

Over the past 60 days, the Zacks Consensus Estimate for 2012 has risen 5.3% to $2.17 per share, as 2 of 3 estimates were revised upward. This indicates year-over-year growth of 55.5%. The Zacks Consensus Estimate for 2013 increased 4.1% to $2.31 over the same timeframe, as 2 of 3 estimates again moved upward. This reflects a year-over-year increase of 6.4%.

Valuation

On a price-to-sales basis, Unilever trades at 1.89, a 57.5% premium to the peer group average of 1.2. On a price-to-book basis, Unilever trades at 5.76, a 79.4% premium to the peer group average of 3.21. However, the stock looks attractive on a return on equity (ROE) basis. It has a trailing 12-month ROE of 29.1%, which is above its peer group average of just 16.9%.

Shares of Unilever have been rising consistently since mid-November. Moreover, the stock is currently trading above its 50- and 200-day moving averages, which stand at $37.37 and $34.37, respectively. In fact, the stock has been consistently trading above its 50-day and 200-day moving averages since late-November 2012.

Volume is strong, averaging roughly 1,270K daily. Unilever has outperformed the S&P 500 in the last three months. The year-to-date return for the stock is 15.99% compared with the S&P 500’s return of 12.86%.

Based in London, Unilever PLC is a subsidiary of The Unilever Group and is a leading manufacturer and marketer of consumer products. It commands market-leading positions in savory, spreads, dressings, tea, ice cream, deodorants and mass skin care product categories. Unilever’s flagship brands include Axe, Lipton, Knorr, Dove, Lux, Rexona and Sunsilk, which cater to a fast growing consumer goods sector. The market cap of the company is $110.6 billion. Close peer Procter & Gamble Co. (PG) holds a Zacks #2 Rank (Buy).

Want More of Our Best Recommendations?

Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>