Market Cap (USD Mil) 129,949
52-Week High (USD) 44.41
52-Week Low (USD) 36.57
52-Week Total Return % 7.6
YTD Total Return % 8.7
Last Fiscal Year End 31 Dec 2013
5-Yr Forward Revenue CAGR % 3.8
5-Yr Forward EPS CAGR % 6.8
Price/Fair Value 0.98
2012 2013
2014(E) 2015(E)Price/Earnings 18.3 19.5 20.2 18.5
EV/EBITDA 11.2 11.4 12.0 11.3
EV/EBIT 13.1 13.2 14.0 13.1
Free Cash Flow Yield % 5.5 5.1 4.6 5.2
Dividend Yield % 3.1 3.4 2.4 2.6
2012 2013
2014(E) 2015(E)Revenue 51,324 49,797 50,373 52,069
Revenue YoY % 10.5 -3.0 1.2 3.4
EBIT 7,062 7,016 7,172 7,680
EBIT YoY % 2.3 -0.7 2.2 7.1
Net Income, Adjusted 4,534 4,474 4,622 5,053
Net Income YoY % -1.3 -1.3 3.3 9.3
Diluted EPS 2.09 2.06 2.13 2.32
Diluted EPS YoY % -1.6 -1.6 3.3 9.3
Free Cash Flow 6,432 6,960 4,126 4,677
Free Cash Flow YoY % 117.7 8.2 -40.7 13.4
Unilever Trims Down With Sale of Slim-Fast; Shares Fairly Valued
See Page 2 for the full Analyst Note from 11 Jul 2014
Erin Lash, CFA Senior Analyst erin.lash@morningstar.com +1 (312) 384-5435
Research as of 11 Jul 2014 Estimates as of 23 Apr 2014 Pricing data through 21 Jul 2014 Rating updated as of 21 Jul 2014
Investment Thesis 23 Apr 2014
We think Unilever's wide moat stems from its expansive global distribution platform and portfolio of essential products. Despite these competitive advantages, the firm remains on the offensive and continues to put resources behind product innovation (launching new products that span the gamut of its portfolio with Knorr Stock Pot bouillon, Dove Repair Expertise hair care, Persil concentrated liquid detergent, and Lipton Yellow Label with tea essence), marketing, and cost-saving initiatives. In our view, this spending is driving balanced and profitable growth, in contrast to several peers, as sales reflect higher prices and increased volume--a notable achievement in this difficult operating landscape.
In the past, an extremely decentralized and complex structure hindered Unilever's ability to realize the growth and profitability that should exude from one of the largest consumer packaged goods players. Unilever's use of a local go-to-market strategy initially failed to generate a clear global strategy, and at the same time, the firm was unable to leverage the scale advantages that should have come from its brands, facilities, and employees.
However, management has sought to reduce the complexity of its operations over the past few years by streamlining its IT systems, improving marketing efficiency, and leveraging its purchasing scale--efforts that appear to be gaining some traction, as profits have generally held up despite cost pressures.
Unilever's status as a giant consumer product firm resulted partly from its foresight to secure a first-mover advantage internationally, particularly in fast-growing emerging markets, where it derives about 57% of consolidated sales. We would not be surprised to see Unilever pursue acquisitions in these faster-growing markets, but with several consumer product firms looking to developing markets for expansion, valuation multiples could trend to irrationally high levels, making such deals less beneficial. We also see the potential, though, for Unilever to grow organically in these regions, similar to selling Alberto Culver's offerings into Brazil, which has been one of the firm's most successful launches.
Netherlands-based Unilever NV and U.K.-based Unilever PLC operate Unilever Group, a diversified packaged food (46% of total sales), and household and personal product (54% of total sales) company. The firm's brands include Knorr soups and sauces, Hellmann's mayonnaise, Lipton teas, and TRESemme hair-care products. With roots that trace back nearly 140 years, Unilever now operates as a leading player in consumer goods, selling products in more than 190 countries.
Profile Vital Statistics
Valuation Summary and Forecasts
Financial Summary and Forecasts
The primary analyst covering this company does not own its stock.
Currency amounts expressed with "$" are in U.S. dollars (USD) unless otherwise denoted.
Historical/forecast data sources are Morningstar Estimates and may reflect adjustments.
(EUR Mil)
Contents
Investment Thesis Morningstar Analysis
Analyst Note
Valuation, Growth and Profitability Scenario Analysis
Economic Moat Moat Trend Bulls Say/Bears Say Credit Analysis
Financial Health Capital Structure Enterprise Risk Management & Ownership Analyst Note Archive Additional Information Morningstar Analyst Forecasts Comparable Company Analysis Methodology for Valuing Companies
Fiscal Year:
Fiscal Year:
1
2 2 3 3 4 5
6 6 6 8 9 - 11 15 17
Morningstar Analysis
Unilever Trims Down With Sale of Slim-Fast; Shares Fairly Valued 11 Jul 2014
In line with our expectations, Unilever announced the sale of Slim-Fast to Kainos Capital, a private equity firm based in Texas. This follows Nestle's decision to sell its Jenny Craig business last fall, as the diet craze has been losing favor in the United States. While we consider Unilever to be a fairly astute acquirer, that was not always the case. It scooped up Slim-Fast in 2000 for $2.3 billion, but this has proved an unprofitable venture for some time (management incurred a $650 million write-down in 2004). Although financial terms of the deal weren't disclosed, we doubt the loss of this business, which has been a laggard in the firm's portfolio, will move the needle on our EUR 33, GBX 2,748, and $44 fair value estimates. We view the stock as fairly valued now, but if Unilever traded down on concerns surrounding unfavorable foreign currency movements or slowing emerging-market growth, similar to late last year, we'd probably recommend investment.
Unilever remains committed to pruning less profitable stock- keeping units, shedding its Wish-Bone, Skippy, and Unipro brands--which in the aggregate represented EUR 600 million in annual sales--over the past several quarters. This news doesn't sway our take that the pricing power inherent in its broad brand portfolio along with the size and scale amassed over many years enables the company to realize a lower unit cost than its smaller peers, driving our wide moat rating.
Given Unilever's vast portfolio, we view these steps as essential to ensure its resources (both financial and personnel) are focused on the highest-return opportunities.
Valuation, Growth and Profitability 23 Apr 2014 After reviewing the assumptions underlying our discounted cash flow model, we're taking our fair value down by $1 to
$44, which implies forward fiscal 2014 price/earnings of 20 times, enterprise value/EBITDA of 13 times, and a free cash flow yield of 4.5%. Our fair value estimate is based on the
12-month rolling average exchange rate, which is $1.34 per EUR 1 as of Apr. 22. Because of Unilever's global business, our fair value estimate will continue to fluctuate with this exchange rate. Left unhedged, depreciation in the euro will lower the value of a dollar-denominated investment in the firm's ADRs.
While slowing global demand is taking a toll on Unilever--given its vast geographic footprint--foreign currencies have been a notable dark spot, constraining reported sales by nearly 9% in the third and fourth quarters of fiscal 2013, which is a sizable hit compared with the nearly 6% hit for the full year. However, we view concerns related to this as overblown. In our view, Unilever's underlying performance, which excludes any foreign currency impact, is more indicative of its long-term trajectory, and we expect that foreign currency rates will ebb and flow. In addition, while negative foreign currency movements disproportionately weighed on emerging markets, we still expect these regions will outpace more mature markets over the near to medium term, reflecting austerity measures in Europe and high unemployment levels and intense competitive pressures in North America.
Overall, we think Unilever's grasp of consumer trends and
investments related to bringing new products to market and
marketing spend will ensure that challenges in emerging
markets are ultimately resolved. We forecast sales growth
of 1.2% in fiscal 2014, but longer term we expect annual
sales growth will approximate 5%, reflecting the benefits
of new products as well as higher prices. The commodity
cost environment is more benign than years past, but we
don't suspect this will persist longer term, given increasing
demand for raw materials in emerging markets. While we've
been encouraged by the company's commitment to wring
additional savings from its cost structure by leveraging its
massive scale, we suspect it will continue to reinvest in its
business. As a result, our forecast assumes that operating
margins approach 16% by 2022, about 140 basis points
above fiscal 2013 adjusted operating margins.
Scenario Analysis
We believe the primary risk to our valuation is management's ability to generate cost savings from current restructuring initiatives. If management is able to simplify Unilever's supply chain and manufacturing network, as well as realize cost synergies from its recent acquisitions (including Alberto Culver and Sara Lee's personal-care brands), we would expect margins to trend closer to its peers (like P&G, which generates 20% operating margins). Further, we assume that competitive pressures from other branded players and private-label offerings ease. In this case, we assume that revenue growth averages 6% annually (compared with 4% annually in our base case), while operating margins exceed 17% over our 10-year explicit forecast (about 180 basis points above our base case). This scenario results in a fair value estimate of $58 per ADR.
Conversely, if management fails to wring additional costs out of the business and if recent acquisitions (such as Alberto Culver) fail to yield the revenue or cost synergies that the firm is targeting, our base-case assumptions could prove too optimistic. In addition, competitive pressures
could intensify and consumer spending levels may weaken further in light of continued economic uncertainty in North America and Europe. Under this case, Unilever's revenue growth would amount to just 2.9% annually, while operating margins would approach 14%. This scenario results in a fair value estimate of $35 per ADR.
Management could also decide to split the business up--into packaged food and household and personal care--which we believe would be a value-enhancing endeavor. Based on a sum-of-the-parts valuation, we assume that the packaged food segment garners an enterprise value/EBITDA multiple of 12.5 times, in line with the multiple Berkshire Hathaway and 3G Capital paid to buy out Heinz last year. We estimate the household and personal-care unit to be valued at an EV/EBITDA multiple of 14 times, in line with L'Oreal. This results in a sum-of-the-parts valuation of $47. However, if the valuation multiples are increased to 14 and 15 times, respectively, the fair value estimate would jump to $51.
Despite this, at this point we still think the probability is small that the board will opt for this course of action.
Economic Moat
We assign Unilever a wide moat because of the strength of its brand portfolio (relative to peers and private-label offerings) and its vast scale, which would be costly to replicate.
Unilever is the third-largest packaged food firm in the world (behind Nestle and Mondelez) and one of the largest global household and personal product firms, with its top 15 brands each generating more than EUR 1 billion in annual revenue.
The pricing power inherent in Unilever's brand portfolio is
evident in the fact that it has been able to increase prices
across its product assortment while still expanding volume
over many years. Even when the firm isn't actively increasing
prices to offset higher commodity costs, new products tend
to come with a higher price tag, and in general, volume has
not come under pressure. Unilever's wide portfolio of
products gives it negotiating leverage with key retailers like Wal-Mart, which are continuously pushing for lower prices.
The size and scale Unilever has amassed over many years enable it to realize a lower unit cost than its smaller peers, resulting in a cost advantage. Unilever ensures its strong competitive position remains intact by investing significant resources behind its brands, and this spending is yielding market share gains. For instance, in the global deodorant category, management cites that Unilever's value share increased roughly 310 basis points between 2009 and 2012, which is notable, in our view. Further, Unilever has consistently generated excess returns on invested capital, and we forecast returns to average 16% over the next 10 years, above our 8.3% cost of capital estimate.
Moat Trend
Unilever's wide moat is stable, as evidenced by the fact that it has been able to increase prices across its product portfolio without taking a hit to volume. Although we see constant competitive pressure in the consumer product industry, we believe Unilever's offerings should appeal to value-conscious consumers, given the essential nature of the products and the brand equity inherent in its portfolio.
Further, spending more than EUR 7 billion (nearly 14% of
sales) on advertising and promotions and EUR 1 billion (more
than 2% of sales) on research and development should
ensure that the firm's wide moat remains intact (this is
comparable to the approximately 11% and 2% of sales spent
on marketing and research and development, respectively,
by wide-moat peers Procter & Gamble and Colgate). More
impressive to us, these investments are resonating with
consumers, as the products launched in the past two years
now represent about one third of Unilever's consolidated
sales.
Bulls Say/Bears Say
Bulls Say Bears Say
3 Unilever's investments behind product innovation are winning with consumers. For one, it recorded a 14%
increase in sales of Domestos (a 60-year-old brand) and a nearly 5% jump in sales of Hellmann's (which is 100 years old).
3 Management recently cited that the launch of TRESemme in Brazil added nearly EUR 150 million to its top line, making it one of Unilever's most successful launches in history.
3 We're encouraged that Unilever remains committed to pruning less-profitable SKUs, such as Wish-Bone, Skippy, and Unipro, that in the aggregate represented EUR 600 million in annual sales.
3 For the first time in 85 years, Unilever was forced to issue a recall (AdeS soy in Brazil) last year, which reduced sales by EUR 60 million-EUR 70 million.
3 Beyond slowing growth, foreign currencies have hindered the firm's top-line growth, constraining reported sales by nearly 9% in each of the last two quarters of fiscal 2013--above the 6% hit incurred for the full year.
3 European antitrust regulators in France fined several
major household firms for price-fixing laundry
detergent from 1997 to 2004, indicating how tough
share gains are to come by in mature markets.
2014(E) 2015(E) 2016(E) 2017(E) 2018(E)
Cash and Equivalents (beginning of period) 2,285 3,818 5,755 8,076 10,657
Adjusted Available Cash Flow 2,789 3,104 3,486 3,751 3,868
Total Cash Available before Debt Service 5,074 6,922 9,241 11,827 14,525
Principal Payments -874 -827 -1,460 -166 -5,326
Interest Payments -518 -518 -518 -518 -518
Other Cash Obligations and Commitments -335 -228 -228 -228 -228
Total Cash Obligations and Commitments -1,727 -1,573 -2,206 -912 -6,072
EUR Millions
% of Commitments
Beginning Cash Balance 2,285 18.3
Sum of 5-Year Adjusted Free Cash Flow 16,998 136.1
Sum of Cash and 5-Year Cash Generation 19,283 154.4
Revolver Availability 6,400 51.3
Asset Adjusted Borrowings (Repayment) — —
Sum of Cash, 5-Year Cash Generation, Revolver and Adjustments 25,683 205.7
Sum of 5-Year Cash Commitments -12,489 —
UN Sector Universe
Business Risk 2
Cash Flow Cushion 6 — —
Solvency Score 5 — —
Distance to Default 2 — —
Credit Rating — — —
Five Year Adjusted Cash Flow Forecast (EUR Mil)
Credit Analysis
Cumulative Annual Cash Flow Cushion
Cash Flow Cushion Possible Liquidity Need
Adjusted Cash Flow Summary
Credit Rating Pillars Peer Group Comparison
Source: Morningstar Estimates
Note: Scoring is on a scale 1-10, 1 being Best, 10 being Worst
Financial Health & Capital Structure
Although the company hasn't hesitated to put its balance sheet to use to pursue acquisitions, we still think Unilever is in solid financial health and should be able to service its debt without any financial strain on its business. We give Unilever an issuer credit rating of A+, implying low default risk. Debt/capital and total debt/adjusted EBITDA amounted to 0.4 and 1.4, respectively, in fiscal 2013. Free cash flow averaged more than 9% during the past five years. Debt maturities (which amount to about EUR 1.7 billion annually on average between 2014 and 2018) should be supported by the firm's free cash flow. We forecast that debt/capital will amount to 0.3 on average over our 10-year explicit forecast, while debt/EBITDA will approximate 1.1. Through 2023, we expect free cash to average nearly 11% of sales.
In our view, Unilever is likely to continue putting its cash to use to expand its emerging-markets presence, after years of sitting on the sidelines. We think the firm's focus will remain on building up its personal-care business (which inherently is faster-growth and more profitable than food and beverage), in line with recent deals to acquire Sara Lee's personal-care business, leading Russian beauty-care firm Kalina, and Alberto Culver. More recently, management has discussed that it is under penetrated in Africa, rural India, Indonesia, and parts of Brazil, which we think it will look to rectify. Absent an acquisition (that the company expects would be in the EUR 1-2 billion range), we expect that Unilever will reinvest its excess cash in the business or return it to shareholders in the form of higher dividends.
Unilever's shareholder dividend currently yields just shy of 3% annually. We forecast the firm will continue paying out around 50% of earnings to shareholders annually (implying a high-single-digit growth rate) over the next 10 years.
Enterprise Risk
Erratic changes in commodity costs for inputs such as
petrochemicals, edible oils, and tea can weigh on Unilever's
Credit Analysis
profitability, and we think increased demand in emerging markets is likely to keep costs elevated over the longer term.
Further, consumer spending remains weak, reflecting high
levels of unemployment and austerity measures that are
constraining growth in Europe; as a result, volume growth
could stall if Unilever raises prices and consumers opt for
lower-priced value offerings. Also, several of Unilever's
largest competitors (such as Procter & Gamble, Colgate,
L'Oreal, and Nestle) are also on the prowl for share gains,
which puts the onus on Unilever to ensure its products win
at the shelf with consumers. European antitrust regulators
in France fined several major household firms for price-fixing
laundry detergent from 1997 to 2004--following a similar
ruling that P&G, Unilever, and Henkel engaged in price-fixing
in powdered laundry detergent from 2002 to 2005--which
indicates to us how tough share gains are to come by in
mature markets. Further, after years of pruning its business,
Unilever is once again on the hunt for acquisitions, which
could prove problematic if it has trouble digesting a
purchase or pays an excessive premium. Management
hasn't shied away from paying up for acquisitions (like
Alberto Culver) in the past, and wringing out the cost savings
needed to make high-priced deals worthwhile is not a slam
dunk. With around 57% of its total sales resulting from
developing and emerging markets, Unilever is subject to
changes in foreign exchange rates. This international
presence also exposes the firm to political and economic
risks. Finally, Unilever is undergoing a major restructuring
initiative, the results of which are far from certain and could
lead to instability in its operations. As a result, we assign
Unilever a medium uncertainty rating.
Name Position Shares Held Report Date* InsiderActivity
NA NA NA NA NA
Top Owners % of Shares
Held % of Fund Assets Change
(k) Portfolio Date
Vanguard Wellington™ 0.39 0.57 585 31 Mar 2014
VA CollegeAmerica Washington Mutual 0.32 0.58 — 30 Jun 2014
VA CollegeAmerica New Perspective 0.25 0.61 — 30 Jun 2014
Vanguard Wellesley Income 0.19 0.63 — 31 Mar 2014
Vanguard Equity Income Fund 0.13 1.00 35 31 Mar 2014
Concentrated Holders
YCG Enhanced Fund — 9.76 14 30 Jun 2014
Neuberger Berman AMT Social Responsive I 0.01 3.63 — 31 May 2014
Neuberger Berman NVIT Socially Rspnb Fd — 3.60 -3 30 Jun 2014
Neuberger Berman Socially Rspns Fund 0.07 3.59 — 31 May 2014
American Century Market Neutral Val Fund — 3.35 8 31 Mar 2014
Top 5 Buyers % of Shares
Held % of Fund Assets
Shares Bought/
Sold (k) Portfolio Date
Brown Brothers Harriman & Co 0.18 0.94 5,075 31 Mar 2014
Capital Research & Mgmt Co - Division 3 0.10 0.33 2,968 31 Mar 2014
Capital Research Global Investors 0.04 0.02 1,145 31 Mar 2014
HS Management Partners, LLC 0.09 5.16 998 31 Mar 2014
Gardner Russo & Gardner 0.42 5.03 846 31 Mar 2014
Top 5 Sellers
Neuberger Berman LLC 0.28 0.35 -2,984 31 Mar 2014
Fidelity Management and Research Company 0.02 — -1,222 31 Mar 2014
Capital World Investors 0.45 0.16 -1,000 31 Mar 2014
BlackRock Advisors LLC 0.14 0.17 -867 31 Mar 2014
D. E. Shaw & Co LP — — -813 31 Mar 2014
Management 23 Apr 2014
Management & Ownership
Management Activity
Fund Ownership
Institutional Transactions
*Represents the date on which the owner’s name, position, and common shares held were reported by the holder or issuer.
We believe that Unilever's stewardship of shareholder capital is standard. Returns on invested capital have historically exceeded our cost of capital estimate, and the firm appears committed to allocating excess cash to shareholders in the form of dividends. However, after years of sitting on the bench, management seems to have an appetite for pursuing acquisitions. Given that firms throughout the consumer product landscape are grappling with intense competition, we expect the land grab in emerging markets to persist, but this could prove detrimental if deals come with a hefty price tag. Paul Polman, 57, has held the top spot at Unilever since January 2009, after most recently serving as executive vice president and zone director for the Americas at Nestle. In our opinion, Polman--the first outsider to run the large consumer goods organization--could be the right person to shake things up, after gaining valuable experience during his nearly 30 years at P&G and Nestle.
Overall, corporate governance at Unilever is fair. In fiscal
2013, Polman garnered a total compensation package of
EUR 8.0 million. We like that Unilever operates with
different individuals holding the positions of chairman and
CEO, as Michael Treschow is chairman. From our view, the
fact that more than 70% of an executive's pay is based on
performance should ensure that management's interests
are aligned with those of minority shareholders. However,
directors are paid hefty sums for serving on Unilever's board,
and the firm's multiple-class structure, with varying voting
rights, is not in the best interests of minority shareholders,
in our eyes.
Analyst Notes
Unilever Continues to Prune Food Offerings; Shares Fairly Valued 22 May 2014
Putting an end to recent speculation, Unilever announced Thursday that it will sell its Ragu (the number-one U.S. pasta sauce brand with more than one fourth of the market) and Bertolli pasta sauce brands to Mizkan Group, a Japanese food manufacturer, for EUR 1.6 billion. The deal is expected to close by the end of June. At more than 3.5 times annual sales, we think the global consumer product firm snagged a solid price for these two food brands. Unilever remains committed to pruning less profitable stock-keeping units, shedding its Wish-Bone, Skippy, and Unipro brands--which in the aggregate represented EUR 600 million in annual sales--over the past several quarters, and we think the Slimfast brand could be the next to go. Given Unilever's vast portfolio, we view these steps as essential to ensure its resources (both financial and personnel) are focused on the highest-return opportunities.
The proceeds are to be allocated to fund a portion of the acquisition of share rights from one of the founding families, but we also think Unilever could pursue further bolt-on deals to build out the depth and breadth of its business, particularly its personal-care offerings, which has been a focus under CEO Paul Polman. This news doesn't sway our take that the pricing power inherent in its broad brand portfolio along with the size and scale amassed over many years enables the company to realize a lower unit cost than its smaller peers, driving our wide moat rating. Because this deal represents less than 1% of Unilever's consolidated sales, we aren't making any changes to our EUR 33, GBX 2,748, and $44 fair value estimates. We view the stock as fairly valued now, but if Unilever traded down on concerns surrounding unfavorable foreign currency movements or slowing emerging-market growth, similar to late last year, we'd probably recommend the shares.
Brand Strength Props Up Unilever's Underlying Growth in 1Q; Shares Fairly Valued 24 Apr 2014
Unilever operates with broad distribution reach and an impressive portfolio of brands--the basis for our wide economic moat--and these advantages were evident in the firm's first-quarter trading update. While foreign currency movements constrained reported sales growth by nearly 9%, underlying sales ticked up 3.6%. What we found to be particularly encouraging was that growth was once again balanced between price (up 1.6%) and volume (up nearly 2%), showcasing the strength of Unilever's product set.
The nearly 7% growth posted in emerging markets was a pronounced slowdown from the more than 10% growth chalked up in last year's first quarter. However, developed markets remain more muted (down 0.3%), and we continue to expect emerging regions to outpace more mature developed markets. From a category perspective, personal care (up 4.5%), home care (up 7.4%), and refreshments (up 5.9%) were standouts, while the food business (down 1.7%) was affected by a later Easter and weak margarine category sales, although management noted that Unilever has returned to share growth in this tepid business.
Unilever held tight to its forecast to grow ahead of its markets and generate underlying operating margin expansion for fiscal 2014, which strikes us as achievable.
Our EUR 33 and $44 fair value estimates, which incorporate
our forecast for sales growth of 1.2% in fiscal 2014,
remain in place. Despite the ill effects of competitive
pressures and unfavorable foreign currency moves of late,
longer term we expect annual sales growth will approximate
5% (benefiting from new products and higher prices) and
operating margins will approach 16% by 2022, about 140
basis points above fiscal 2013 adjusted operating margins,
as Unilever wrings additional savings from its cost structure
but invests a portion behind its brands.
Analyst Notes
We're encouraged that Unilever remains committed to pruning less profitable stock-keeping units. Over the past few years, the firm shed its Wish-Bone, Skippy, and Unipro brands--which in the aggregate represented EUR 600 million in annual sales--and it continues to evaluate its portfolio.
Management specifically drew attention to the fact that it
is reviewing its pasta sauce business (which consists of the
Ragu brand) as well as its Slimfast brand in the U.S. Given
Unilever's vast portfolio, we think it's essential that its
resources (both financial and personnel) are focused on the
highest-return opportunities, and we applaud these
strategic actions.
Growth (% YoY)
3-Year
Hist. CAGR 2011 2012 2013
2014 20155-Year Proj. CAGR
Revenue 4.0 5.0 10.5 -3.0 1.2 3.4 3.8
EBIT 2.0 4.2 2.3 -0.7 2.2 7.1 5.0
EBITDA 2.4 4.2 4.2 -1.1 2.4 6.5 4.8
Net Income 0.2 3.2 -1.3 -1.3 3.3 9.3 6.8
Diluted EPS -0.1 3.1 -1.6 -1.6 3.3 9.3 6.8
Earnings Before Interest, after Tax 5.8 2.7 10.4 4.3 -21.0 7.3 -0.2
Free Cash Flow 13.2 -38.5 117.7 8.2 -40.7 13.4 -3.7
Profitability
3-Year
Hist. Avg 2011 2012 2013
2014 20155-Year Proj. Avg
Operating Margin % 14.2 14.9 13.8 14.1 14.2 14.8 14.7
EBITDA Margin % 16.5 17.1 16.1 16.4 16.6 17.1 17.1
Net Margin % 9.2 9.9 8.8 9.0 9.2 9.7 9.9
Free Cash Flow Margin % 11.0 6.4 12.5 14.0 8.2 9.0 9.2
ROIC % 21.6 18.5 22.1 24.0 17.5 17.3 16.8
Adjusted ROIC % 19.5 17.1 19.8 21.5 16.5 16.7 16.2
Return on Assets % 9.9 9.6 9.6 10.6 9.9 10.2 10.2
Return on Equity % 30.9 29.6 30.4 32.8 29.8 28.2 26.6
Leverage
3-Year
Hist. Avg 2011 2012 2013
2014 20155-Year Proj. Avg
Debt/Capital 0.45 0.49 0.40 0.45 0.41 0.37 0.35
Total Debt/EBITDA 1.46 1.73 1.24 1.41 1.38 1.29 1.23
EBITDA/Interest Expense 15.57 14.69 15.71 16.33 16.16 17.21 18.10
2012 2013
2014(E) 2015(E)Price/Fair Value 1.13 0.89 — —
Price/Earnings 18.3 19.5 20.2 18.5
EV/EBITDA 11.2 11.4 12.0 11.3
EV/EBIT 13.1 13.2 14.0 13.1
Free Cash Flow Yield % 5.5 5.1 4.6 5.2
Dividend Yield % 3.1 3.4 2.4 2.6
Cost of Equity % 10.0
Pre-Tax Cost of Debt % 4.5
Weighted Average Cost of Capital % 8.3
Long-Run Tax Rate % 26.0
Stage II EBI Growth Rate % 5.0
Stage II Investment Rate % 14.3
Perpetuity Year 20
EUR Mil Firm Value (%) Per Share
Value
Present Value Stage I 38,167 36.5 13.05
Present Value Stage II 29,018 27.8 9.92
Present Value Stage III 37,323 35.7 12.76
Total Firm Value 104,507 100.0 35.74
Cash and Equivalents 2,285 — 0.78
Debt -11,501 — -3.93
Preferred Stock — — —
Other Adjustments -1,977 — -0.68
Equity Value 93,314 — 31.91
Projected Diluted Shares 2,924
Fair Value per Share —
Morningstar Analyst Forecasts
Forecast Fiscal Year Ends in December
Financial Summary and Forecasts
Valuation Summary and Forecasts
Key Valuation Drivers
Discounted Cash Flow Valuation
Additional estimates and scenarios available for download at http://select.morningstar.com.
The data in the table above represent base-case forecasts in the company’s reporting currency as of the beginning of the current year. Our fair value estimate may differ from the equity value per share shown above due to our time value of money adjustment and in cases where probability-weighted scenario analysis is performed.
(USD)
2011 2012 2013
2014 2015Revenue 46,467 51,324 49,797 50,373 52,069
Cost of Goods Sold 27,930 30,703 29,245 29,468 30,408
Gross Profit 18,537 20,621 20,552 20,905 21,661
Selling, General & Administrative Expenses 3,529 4,594 4,513 4,534 4,582
Advertising & Marketing 6,069 6,763 6,832 6,901 7,029
Research & Development 1,009 1,003 1,040 1,108 1,146
Depreciation & Amortization (if reported separately) 1,029 1,199 1,151 1,189 1,223
Operating Income (ex charges) 6,901 7,062 7,016 7,172 7,680
Restructuring & Other Cash Charges 612 — — — —
Impairment Charges (if reported separately) -144 73 -501 — —
Other Non-Cash (Income)/Charges — — — — —
Operating Income (incl charges) 6,433 6,989 7,517 7,172 7,680
Interest Expense 540 526 500 518 518
Interest Income 163 129 -30 131 206
Pre-Tax Income 6,056 6,592 6,987 6,786 7,369
Income Tax Expense 1,622 1,735 1,851 1,764 1,916
Other After-Tax Cash Gains (Losses) 189 91 127 — —
Other After-Tax Non-Cash Gains (Losses) — — — — —
(Minority Interest) -371 -468 -421 -400 -400
(Preferred Dividends) — — — — —
Net Income 4,252 4,480 4,842 4,622 5,053
Weighted Average Diluted Shares Outstanding 2,908 2,916 2,924 2,924 2,924
Diluted Earnings Per Share 1.46 1.54 1.66 1.58 1.73
Adjusted Net Income 4,595 4,534 4,474 4,622 5,053
Diluted Earnings Per Share (Adjusted) 1.58 1.55 1.53 1.58 1.73
Dividends Per Common Share 1.15 1.24 1.38 1.06 1.16
EBITDA 7,462 8,188 8,668 8,362 8,904
Adjusted EBITDA 7,930 8,261 8,167 8,362 8,904
Morningstar Analyst Forecasts
Income Statement (EUR Mil)
Fiscal Year Ends in December Forecast
2011 2012 2013
2014 2015Cash and Equivalents 3,484 2,465 2,285 3,818 5,755
Investments — — — — —
Accounts Receivable 4,513 4,436 4,831 4,870 5,016
Inventory 4,601 4,436 3,937 3,967 4,094
Deferred Tax Assets (Current) 219 217 217 217 217
Other Short Term Assets 1,453 401 760 769 795
Current Assets 14,270 11,955 12,030 13,641 15,876
Net Property Plant, and Equipment 8,774 9,445 9,344 10,477 11,519
Goodwill 14,896 14,619 13,917 13,917 13,917
Other Intangibles 7,017 7,099 6,987 6,805 6,623
Deferred Tax Assets (Long-Term) 421 1,113 1,084 1,062 1,041
Other Long-Term Operating Assets 1,110 1,071 1,068 1,080 1,117
Long-Term Non-Operating Assets 1,024 864 1,083 1,083 1,083
Total Assets 47,512 46,166 45,513 48,066 51,175
Accounts Payable 10,971 11,668 11,735 11,808 12,168
Short-Term Debt 5,840 2,656 4,010 4,000 4,000
Deferred Tax Liabilities (Current) 725 1,129 1,254 1,317 1,383
Other Short-Term Liabilities 393 361 379 383 396
Current Liabilities 17,929 15,814 17,378 17,508 17,947
Long-Term Debt 7,878 7,565 7,491 7,500 7,500
Deferred Tax Liabilities (Long-Term) 1,383 1,493 1,669 1,752 1,840
Other Long-Term Operating Liabilities 1,195 1,246 1,188 1,202 1,242
Long-Term Non-Operating Liabilities 4,206 4,332 2,972 2,972 2,972
Total Liabilities 32,591 30,450 30,698 30,935 31,501
Preferred Stock — — — — —
Common Stock 621 624 622 622 622
Additional Paid-in Capital — — — — —
Retained Earnings (Deficit) 19,676 20,731 20,468 22,779 25,305
(Treasury Stock) — — — — —
Other Equity -6,004 -6,196 -6,746 -6,746 -6,746
Shareholder's Equity 14,293 15,159 14,344 16,655 19,181
Minority Interest 628 557 471 476 492
Total Equity 14,921 15,716 14,815 17,131 19,674
Morningstar Analyst Forecasts
Balance Sheet (EUR Mil)
Fiscal Year Ends in December Forecast
2011 2012 2013
2014 2015Net Income 3,436 3,268 3,458 5,022 5,453
Depreciation 838 986 984 1,007 1,041
Amortization 191 213 167 182 182
Stock-Based Compensation 105 153 228 229 231
Impairment of Goodwill — — — — —
Impairment of Other Intangibles — — — — —
Deferred Taxes 1,622 1,735 1,851 168 175
Other Non-Cash Adjustments -563 -341 -594 — —
(Increase) Decrease in Accounts Receivable -399 1 -917 -39 -146
(Increase) Decrease in Inventory -219 -9 168 -30 -127
Change in Other Short-Term Assets — — — -9 -26
Increase (Decrease) in Accounts Payable 441 830 949 73 360
Change in Other Short-Term Liabilities — — — 4 13
Cash From Operations 5,452 6,836 6,294 6,608 7,157
(Capital Expenditures) -1,835 -1,975 -1,791 -2,141 -2,083
Net (Acquisitions), Asset Sales, and Disposals -1,859 -55 675 — —
Net Sales (Purchases) of Investments -982 1,001 -281 — —
Other Investing Cash Flows 209 274 236 1 4
Cash From Investing -4,467 -755 -1,161 -2,139 -2,079
Common Stock Issuance (or Repurchase) 30 48 24 — —
Common Stock (Dividends) -2,485 -2,699 -2,993 -2,311 -2,526
Short-Term Debt Issuance (or Retirement) 1,261 -870 350 -10 —
Long-Term Debt Issuance (or Retirement) 2,512 -2,124 925 9 —
Other Financing Cash Flows -907 -977 -3,696 -624 -615
Cash From Financing 411 -6,622 -5,390 -2,935 -3,142
Exchange Rates, Discontinued Ops, etc. (net) -384 -220 84 — —
Net Change in Cash 1,012 -761 -173 1,533 1,936
Morningstar Analyst Forecasts
Cash Flow (EUR Mil)
Fiscal Year Ends in December Forecast
Company/Ticker Price/Fair
Value 2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)Nestle SA NSRGY USA 0.99 21.5 19.8 18.8 13.5 13.0 12.4 17.6 23.9 22.9 3.3 3.4 3.3 2.3 2.4 2.3
Procter & Gamble Co PG USA 0.90 18.2 18.9 17.7 12.7 12.6 11.9 19.4 20.1 18.1 3.1 3.3 3.2 2.5 2.5 2.5
General Mills Inc GIS USA 1.02 16.8 19.9 17.6 10.8 11.9 11.1 13.0 17.9 18.6 4.5 5.1 5.1 1.7 1.9 1.8
Average 18.8 19.5 18.0 12.3 12.5 11.8 16.7 20.6 19.9 3.6 3.9 3.9 2.2 2.3 2.2
Unilever NV UN US 0.98 19.5 20.2 18.5 11.4 12.0 11.3 19.6 21.5 19.0 6.2 5.8 5.0 1.8 1.9 1.8
Company/Ticker Total Assets
(Mil) 2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)Nestle SA NSRGY USA 120,442 CHF 15.8 15.3 15.4 14.9 14.6 14.8 16.2 17.7 17.8 8.1 9.3 9.5 3.1 3.1 3.2
Procter & Gamble Co PG USA — USD 10.0 11.5 12.4 10.0 11.3 12.3 17.5 17.4 19.0 8.3 8.3 8.9 3.1 3.2 3.4
General Mills Inc GIS USA — USD 11.4 11.8 12.7 10.9 11.2 12.3 28.3 27.6 29.5 8.5 8.0 8.3 2.9 2.9 3.0
Average 12.4 12.9 13.5 11.9 12.4 13.1 20.7 20.9 22.1 8.3 8.5 8.9 3.0 3.1 3.2
Unilever NV UN US 45,513 EUR 24.0 17.5 17.3 21.5 16.5 16.7 32.8 29.8 28.2 10.6 9.9 10.2 3.4 2.4 2.6
Company/Ticker Revenue
(Mil) 2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)Nestle SA NSRGY USA 92,373 CHF 0.1 1.0 4.4 -6.2 13.1 5.2 -5.8 13.3 5.2 -2,740.7 33.6 -34.6 5.3 5.2 5.2
Procter & Gamble Co PG USA 84,167 USD 0.6 2.0 2.9 -1.1 4.2 6.1 10.6 0.6 6.9 -20.3 16.1 10.6 6.6 7.5 7.5
General Mills Inc GIS USA 17,774 USD 6.7 0.8 2.9 7.8 0.8 4.7 14.4 -1.7 9.0 162.1 38.0 -5.8 8.6 16.8 -0.2
Average 2.5 1.3 3.4 0.2 6.0 5.3 6.4 4.1 7.0 -866.3 29.2 -9.9 6.8 9.8 4.2
Unilever NV UN US 49,797 EUR -3.0 1.2 3.4 -0.7 2.2 7.1 -1.6 3.3 9.3 8.2 -40.7 13.4 10.6 -22.8 9.3
Comparable Company Analysis
These companies are chosen by the analyst and the data are shown by nearest calendar year in descending market capitalization order.
Valuation Analysis
Returns Analysis
Growth Analysis
Price/Earnings EV/EBITDA Price/Free Cash Flow Price/Book Price/Sales
ROIC % Adjusted ROIC % Return on Equity % Return on Assets % Dividend Yield %
Revenue Growth % EBIT Growth % EPS Growth % Free Cash Flow Growth % Dividend/Share Growth %
Last Historical Year
Last Historical Year
Company/Ticker Net Income
(Mil) 2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)Nestle SA NSRGY USA 10,015 CHF 47.9 48.5 48.6 17.6 19.1 19.2 14.2 15.8 16.0 10.8 12.1 12.1 12.9 9.9 9.9
Procter & Gamble Co PG USA 12,373 USD 49.6 49.8 50.1 22.3 22.7 23.3 18.7 19.1 19.7 14.7 14.3 14.6 12.9 12.6 13.6
General Mills Inc GIS USA 1,869 USD 36.1 35.6 36.0 19.5 19.4 19.7 16.2 16.2 16.5 10.5 10.0 10.4 13.0 10.5 9.4
Average 44.5 44.6 44.9 19.8 20.4 20.7 16.4 17.0 17.4 12.0 12.1 12.4 12.9 11.0 11.0
Unilever NV UN US 4,474 EUR 41.3 41.5 41.6 16.4 16.6 17.1 14.1 14.2 14.8 9.0 9.2 9.7 9.0 8.9 9.7
Company/Ticker Total Debt
(Mil) 2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)Nestle SA NSRGY USA 23,130 CHF 37.0 33.9 32.8 27.0 25.3 24.7 19.1 22.5 24.2 1.4 1.2 1.2 1.9 1.9 1.9
Procter & Gamble Co PG USA 31,543 USD 46.3 49.4 49.3 31.7 33.1 33.0 28.1 23.2 23.0 1.7 1.7 1.6 2.0 2.1 2.1
General Mills Inc GIS USA 7,969 USD 119.4 134.5 134.5 54.4 57.4 57.4 10.4 10.8 9.3 2.3 2.5 2.4 3.4 3.5 3.6
Average 67.6 72.6 72.2 37.7 38.6 38.4 19.2 18.8 18.8 1.8 1.8 1.7 2.4 2.5 2.5
Unilever NV UN US 11,501 EUR 80.2 69.1 60.0 44.5 40.9 37.5 16.3 16.2 17.2 1.4 1.4 1.3 3.2 2.9 2.7
Company/Ticker Market Cap
(Mil) 2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)2013
2014(E) 2015(E)Nestle SA NSRGY USA 245,153 USD 2.00 3.86 4.16 0.91 1.04 1.08 0.65 0.80 0.82 0.56 0.95 1.01 65.4 60.8 60.7
Procter & Gamble Co PG USA 217,235 USD 2.03 1.74 1.46 0.80 0.78 0.76 0.57 0.55 0.52 0.48 0.42 0.34 57.6 60.1 58.2
General Mills Inc GIS USA 32,377 USD 1.11 1.34 0.40 0.81 0.81 0.71 0.52 0.52 0.42 0.36 0.37 0.11 46.8 53.9 50.5
Average 1.71 2.31 2.01 0.84 0.88 0.85 0.58 0.62 0.59 0.47 0.58 0.49 56.6 58.3 56.5
Unilever NV UN US 129,949 USD 0.78 1.31 1.97 0.69 0.78 0.88 0.47 0.55 0.66 0.57 0.95 1.44 61.8 50.0 50.0
Comparable Company Analysis
These companies are chosen by the analyst and the data are shown by nearest calendar year in descending market capitalization order.
Profitability Analysis
Leverage Analysis
Liquidity Analysis
Gross Margin % EBITDA Margin % Operating Margin % Net Margin % Free Cash Flow Margin %
Debt/Equity % Debt/Total Cap % EBITDA/Interest Exp. Total Debt/EBITDA Assets/Equity
Cash per Share Current Ratio Quick Ratio Cash/Short-Term Debt Payout Ratio %
Last Historical Year
Last Historical Year
3 Moat Valuation 3 Three-Stage Discounted Cash Flow 3 Weighted Average Cost of Capital 3 Fair Value Estimate 3 Scenario Analysis 3 Uncertainty Ratings 3 Margin of Safety 3 Consider Buying/Selling 3 Stewardship Rating
their fair value. A number of components drive this rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s intrinsic value based on a discounted cash-flow model, (3) the margin of safety bands we apply to our Fair Value Estimate, and (4) the current stock price relative to our fair value estimate.
The concept of the Morningstar Economic Moat™ Rating plays a vital role not only in our qualitative assessment of a firm’s investment potential, but also in our valuation process.
We assign three moat ratings—none, narrow, or wide—as well as the Morningstar Moat Trend™ Rating—positive, stable, or negative—to each company we cover. There are two major requirements for firms to earn either a narrow or wide moat rating: (1) the prospect of earning above-average returns on capital; and (2) some competitive edge that pre- vents these returns from quickly eroding. The assumptions we make about a firm’s moat determine the length of “eco- nomic outperformance” that we assume in the latter stages
enterprise value and the value of the firm if no future net in- vestment were to occur. Said differently, moat value identi- fies the value generated by the firm as a result of any future net new investment. Our Moat Trend Rating reflects our as- sessment of whether each firm’s competitive advantage is either getting stronger or weaker, since we think of moats as dynamic, rather than static.
At the heart of our valuation system is a detailed projection of a company’s future cash flows. The first stage of our three- stage discounted cash flow model can last from 5 to 10 years and contains numerous detailed assumptions about various financial and operating items. The second stage of our mod- el—where a firm’s return on new invested capital (RONIC) and earnings growth rate implicitly fade until the perpetuity year—can last anywhere from 0 years (for no-moat firms) to 20 years (for wide-moat companies). In our third stage, we assume the firm’s RONIC equals its weighted average cost of capital, and we calculate a continuing value using a standard Morningstar Research Methodology for Valuing Companies
Analyst conducts company and industry research:
Financial statement analysis Channel checks Trade-show visits Industry and company reports and journals Conference calls Management and site visits 3 3
3 3
3 3
Strength of competitive advantage is rated:
None, Narrow, or Wide Advantages that confer an economic moat:
High Switching Costs (Microsoft)
Cost advantage (Wal-Mart) Intangible assets (Johnson & Johnson) Network Effect (Mastercard) Efficient Scale
Analyst considers past financial results and focuses on competitive position and future prospects to forecast future cash flows.
Assumptions are entered into Morningstar’s proprietary discounted cash-flow model.
The analyst then eval- uates the range of potential intrinsic values for the company and assigns an Uncertainty Rating: Low, Medium, High, Very High, or Extreme.
The Uncertainty Rating determines the margin of safety required before we would rec- ommend the stock.
The higher the uncer- tainty, the wider the margin of safety.
Analyst uses a discounted cash-flow model to develop a Fair Value Estimate, which serves as the foundation for the Morningstar Rating for stocks.
The current stock price relative to Morningstar’s Fair Value Estimate, adjusted for uncertainty, determines the Morningstar Rating for stocks.
The Morningstar Rating for stocks is updated each evening after the market closes.
QQQQQ QQQQ QQQ QQ Q
Fundamental Analysis
Economic Moat
TMRating
Company Valuation
Fair Value Estimate
Uncertainty
Assessment
3 Uncertainty Methodology 3 Cost of Equity Methodology 3 Morningstar DCF Valuation Model 3 Stewardship Rating Methodology
* Please contact a sales representative for more information.
Instead, we rely on a system that measures the estimated volatility of a firm’s underlying future free cash flows, tak- ing into account fundamental factors such as the diversity of revenue sources and the firm’s fixed cost structure.
We also employ a number of other tools to augment our valu- ation process, including scenario analysis, where we assess the likelihood and performance of a business under different economic and firm-specific conditions. Our analysts typically model three to five scenarios for each company we cover, stress-testing the model and examining the distribution of resulting fair values.
The Morningstar Uncertainty Rating captures the range of these potential fair values, based on an assessment of a company’s future sales range, the firm’s operating and fi- nancial leverage, and any other contingent events that may impact the business. Our analysts use this range to assign an appropriate margin of safety—or the discount/premium
prices receive our highest rating of five stars, whereas firms trading above our consider-selling prices receive our lowest rating of one star.
Morningstar Margin of Safety and Star Rating Bands
Price/Fair Value 2.75
2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25
Low Medium High Very High*
* Occasionally a stock’s uncertainty will be too high for us to estimate, in which case we label it Extreme.
• 5 Star
• 4 Star
• 3 Star
• 2 Star
• 1 Star
Uncertainty Rating
— 125%
105% — 80% —
— 95%
— 135%
110% —
70% —
— 90%
— 155%
115% —
60% —
— 85%
— 175%
125% —
50% —
— 80%
New Morningstar Margin of Safety and Star Rating Bands as of August 18th, 2011
Our corporate Stewardship Rating represents our assess- ment of management's stewardship of shareholder capital, with particular emphasis on capital allocation decisions.
Analysts consider companies' investment strategy and
valuation, financial leverage, dividend and share buyback
policies, execution, compensation, related party transac-
tions, and accounting practices. Corporate governance
practices are only considered if they've had a demonstrated
impact on shareholder value. Analysts assign one of three
ratings: "Exemplary," "Standard," and "Poor." Analysts judge
stewardship from an equity holder's perspective. Ratings
are determined on an absolute basis. Most companies will
receive a Standard rating, and this is the default rating in
the absence of evidence that managers have made
exceptionally strong or poor capital allocation decisions.
coverage list.
3 Encapsulates our in-depth modeling and quantitative work in one letter grade.
3 Allows investors to rank companies by each of the four underlying com- ponents of our credit ratings, including both analyst-driven and quantitative measures.
3 Provides access to all the underlying forecasts that go into the rating, available through our insti- tutional service.
different lenses—qualitative and quantitative, as well as fundamental and market-driven. We therefore evaluate each company in four broad categories.
Business Risk
Business Risk captures the fundamental uncertainty around a firm’s business operations and the cash flow generated by those operations. Key components of the Business Risk rating include the Morningstar Economic Moat
™Rating and the Morningstar Uncertainty Rating.
Cash Flow Cushion
™Morningstar’s proprietary Cash Flow Cushion
™ratio is a fundamental indicator of a firm’s future financial health The measure reveals how many times a company’s internal cash generation plus total excess liquid cash will cover its debt-like contractual commitments over the next five years. The Cash Flow Cushion acts as a predictor of financial distress, bringing to light potential refinancing, operational, and liquidity risks inherent to the firm.
3 3 3 3 3
3
The higher the rating, the less likely we think the company is to default on these obligations.
The Morningstar Corporate Credit Rating builds on the modeling expertise of our securities research team. For each company, we publish:
Five years of detailed pro-forma financial statements Annual estimates of free cash flow
Annual forecasts of return on invested capital
Scenario analyses, including upside and downside cases Forecasts of leverage, coverage, and liquidity ratios for five years
Estimates of off balance sheet liabilities
These forecasts are key inputs into the Morningstar Corporate Credit Rating and are available to subscribers at select.morningstar.com.
Morningstar Research Methodology for Determining Corporate Credit Ratings
Competitive Analysis
Cash-Flow Forecasts
Scenario Analysis
Quantitative Checks
Rating Committee
A AA
BBB
C
D
