Colgate's Dominant Market Share And Organic Growth Keep It Best-In-Class

KeyBanc initiated coverage on Colgate-Palmolive Company CL with a Sector Weight rating. The firm cited Colgate's best-in-class track record and above-category organic growth as key reasons for the initiation.

"Dominate market share positions and robust margin structure with further expansion opportunity can continue," Keybanc said in a note.

The bank thinks that organic growth is closer to the low end of the 4-7 percent growth range, due to competitive pressures, which is "limiting the upside we need to see in shares to launch a more positive view."

Key Points

• Best in class organic sales growth - A strong global footprint and emerging market exposure. The company also has investments in eCommerce to sustain long term growth.
• Leading Market shares in key geographies will promote profitable growth via scale.
• Margin improvements and continual cost cutting should drive EPS growth once FX headwinds eventually subside.

KeyBanc said Colgate's premium valuation and need to see reaccelerating emerging market growth keeps them on the sidelines for now.