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.
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