Morgan Stanley Upgrades Colgate-Palmolive On Attractive Growth Opportunity

  • Morgan Stanley analyst Dara Mohsenian upgraded Colgate-Palmolive Company CL from Equal-Weight to Overweight with a price target of $82.
  • The analyst believes that a sharp recent stock pullback of nearly 10% in the last month, during which CL underperformed the S&P 500 by nearly 1,800 bps, offers a buying opportunity into a structurally attractive name.
  • CL has robust pricing power, sustainably strong pet trends, positive corporate strategy changes underway that are driving improved results, and attractive growth opportunity in emerging markets, making it a solid story.
  • The analyst also believes CL's 2023 results will come in above consensus, which is likely to be depressed by overly conservative guidance, and that CL's near-term market share trends are already solid and likely to be boosted by higher marketing spend built into CY23 guidance.
  • The analyst expects a gross margin upside in 2023 of about 200 basis points expansion.
  • The analyst said Colgate replaced Procter & Gamble PG in the list as the top Overweight in household products (HPC).
  • The analyst views CL as a mid-single digit long-term topline grower post COVID, including 6% in 2023 with excess pricing, similar to its 6.2% three-year CAGR in 2022 versus a pre COVID 2019, with recent corporate strategy changes driving higher growth, along with both greater sustainable growth and increased mix contribution from the pet business.
  • The analyst expects CL to deliver 7% EPS growth in 2023,above recent weaker-than-expected but overly conservative in the minds CL Low Single Digit-Mid Single Digit EPS growth guidance.
  • Price Action: CL shares are trading higher by 2.49% at $73.37 on the last check Monday.
  • Photo Via Company
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