Colgate-Palmolive Hits 52-week High on Concrete Growth Plans - Analyst Blog

Shares of Colgate-Palmolive Co. (CL), global dealer in consumer goods, hit a 52-week high of $70.31 on Dec 19, 2014, before closing at $69.98 and amassing a year-to-date return of 7.3%. This Zacks Rank #3 (Hold) company has been gaining momentum on the back of solid fundamentals, as evident from its market-leading position in oral care and personal care product categories.

We believe that the company's continued focus on product innovation, along with its globally recognized brands and presence in both developed and emerging economies, aid in utilizing growth opportunities and consequently boost profitability.

The company continues to progress with its Global Growth and Efficiency Program or 2012 Restructuring Program while also aggressively funding the growth programs. These initiatives contributed to the expansion of adjusted operating margin by about 70 basis points in third-quarter 2014. The company's four-year Global Growth and Efficiency Program focuses on reducing structural costs in order to improve gross and operating profit, standardizing processes to improve decision-making procedure and enhance the company's market share position worldwide.

Further, Colgate has a track record of either meeting or beating the quarterly earnings expectations. Of the trailing four quarters, the company has posted positive surprises in two and reported in-line earnings in the other two, gathering an average surprise of 0.67%.

Colgate's third-quarter 2014 earnings per share registered an impressive 4% year-over-year growth, coming ahead of the Zacks Consensus Estimate of 76 cents per share. Shares have risen 7.6% since the earnings release.

Additionally, Colgate-Palmolive has always followed a disciplined capital allocation strategy that focuses on making investments to develop business while using the excess cash to enhance shareholder returns through dividend payouts and share buybacks.

In the first three quarters of 2014, the company generated $2,392 million of cash from operations. During this nine-month period of 2014, Colgate-Palmolive paid a total dividend of $990 million and bought back shares worth $1,119 million. The company has been regularly increasing its dividend every year since 2001 and presently pays an annual cash dividend of $1.44.

The company's strong cash generation ability has also enabled it to reduce long-term debts. These factors reflect the company's sound financial status and instill confidence among investors about the stock.

Moreover, the long term EPS growth rate of the company is in line with the peer group average of 8.6%. The stock currently trades at a forward P/E of 23.9x, at a slight premium from the peer group average of 23.4x.

Besides Colgate-Palmolive, The Home Depot Inc. (HD), Leggett & Platt Inc. (LEG) and Nordstrom Inc. (JWN) have also hit 52-week highs of $102.00, $42.57 and $77.93, respectively on Dec 19, 2014.

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