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In a report published Thursday, Morgan Stanley analyst Dara Mohsenian downgraded the rating on Colgate-Palmolive Company (NYSE: CL) from Overweight to Equal-Weight, while reducing the price target from $76 to $72.

Colgate-Palmolive's stock is currently trading at a premium versus the company's mega-cap peers. Analyst Dara Mohsenian believes that the valuation "appropriately reflects the company's superior fundamentals, including greater exposure to higher-growth emerging market geographies and personal care product categories, a superior ROIC, a more defensive business mix, and greater pricing power."

On April 20, Goldman Sachs had downgraded the rating on Colgate-Palmolive from Neutral to Sell, while reducing the price target from $71 to $64, saying that investors seemed to be underestimating the company's FX exposure and the concomitant impact on its margins.

Colgate-Palmolive is expected to generate higher top line growth than its peers, given its 5.4 percent two-year average organic sales growth over the last three quarters. As compared to the 3 percent growth rate achieved by Procter & Gamble Co (NYSE: PG), The Coca-Cola Co (NYSE: KO) and PepsiCo, Inc. (NYSE: PEP).

In the report Morgan Stanley noted, "Near term, pricing power is a key industry theme given US-based companies' desire to pass on pricing internationally to cover unfavorable FX, as well as hold on to US pricing despite lower commodity prices. We believe CL's pricing power remains greater than peers given its skew to the oral/personal care categories, which have more brand loyalty and less trade-down risk given limited private label penetration."

The EPS estimates for 2015, 2016 and 2017 have been reduced from $2.90 to $2.88, from $3.18 to $3.13 and from $3.47 to $3.41, respectively, to reflect the continued unfavorable FX pressure as well as a difficult competitive environment.

Latest Ratings for CL

Sep 2016Bank of AmericaUpgradesNeutralBuy
Sep 2016KeyBancInitiates Coverage onSector Weight
Jul 2016UBSMaintainsNeutral

View More Analyst Ratings for CL
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Posted-In: Morgan StanleyAnalyst Color Downgrades Price Target Analyst Ratings


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