Fund managers have been rotating into FTSE 100 shares during the last month. However I believe Unilever (LSE:ULVR) might be set to outperform the index over the following 12 months.

The agency is in the midst of a considerable restructuring course of. And this might considerably enhance its development prospects over the long run. 

Restructuring

During the last 15 months or so, Unilever has been taking the view that much less is extra. Its perception is that its development of its strongest strains has been stunted by a few of its weaker ones. 

Somewhat than attempting to determine how to get extra from these underperforming divisions – most notably ice cream – the corporate has determined to divest them. And this has labored properly, thus far.

Unencumbered by weaker product strains, Unilever reported gross sales development of 4% in 2024 and a rise in earnings per share of just about 15%. In consequence, the inventory’s up 15% within the final 12 months.

Regardless of the sturdy progress, the corporate isn’t stopping there. It’s seeking to make additional divestitures to proceed its restructuring course of and has appointed a brand new CEO to push issues alongside. 

There are clearly variations when it comes to efficiency throughout Unilever’s numerous divisions. The Meals unit managed 2.6% gross sales development in 2024 whereas Magnificence & Wellbeing achieved 6.5%.

My perception is that additional divestitures will proceed to push the share price larger over the following 12 months. However there are some potential points that would get in the way in which of this thesis.

Development

I like Unilever’s transformation prospects. However divestitures can solely take the corporate thus far – what’s actually going to impression the share price is the efficiency of the remaining companies.

Buyers bought illustration of this in February. The inventory fell 9% when the agency reported slowing gross sales development within the fourth quarter and anticipated a difficult begin to 2025.

Importantly, there are some issues Unilever can’t do a lot about. The agency’s anticipating a weak buying and selling atmosphere within the close to future and the danger is that this lasts longer than anticipated.

It’s pure to assume the corporate is considerably shielded from financial downturns. And whereas that is true to an extent, it depends on prospects selecting its manufacturers over cheaper options.

This may present a restrict to how far Unilever shares can go. However I believe it can have sufficient to outperform the FTSE 100 over the remainder of the 12 months. 

The corporate’s strengths are well-known. And if buyers can see sufficient indicators of progress to conclude there’s extra development coming, I anticipate sturdy returns from the inventory.

Lengthy-term investing

Investing properly includes extra than simply taking a look at what may occur within the subsequent 12 months. However the ongoing modifications at Unilever may set the agency up for long-term success.

After all, that is my opinion and I might be improper. However I believe the inventory’s price contemplating – particularly for buyers searching for passive earnings. There’s a 3.25% dividend yield to begin with and I anticipate continued development to push this larger.

The flexibility to develop whereas returning money to shareholders is usually a formulation for large returns. And Unilever may be a defensive inventory, however its development prospects shouldn’t be underestimated.