Unilever PLC (LON:ULVR) has been upgraded to ‘neutral’ from ‘underweight’ by analysts at JP Morgan as they turned to defensive stocks amid a growing risk of a recession caused by the coronavirus outbreak.
In a note on Tuesday, the investment bank also cut its target price for the FTSE 100 consumer goods giant to 3,850p from 4,210p and estimated that the virus and recent movements in foreign exchange could reduce earnings per share for firms by between 5-10%, although if the situation deteriorated further this could carry an additional 10-20% hit.
However, analysts also said a recession was likely to cause a downturn in consumer discretionary spending, and as such companies making mass market home and personal care products such as Unilever will be part of market segments with “defensive consumption”.
Sectors more at risk from a downturn, the bank said, will be alcoholic beverages and beauty products as consumers reigned in spending on non-stable items.
Shares in Unilever jumped 4.6% to 3,898p in late-morning trading.