Raymond James analyst Olivia Tong upgraded Colgate-Palmolive Co CL to Outperform from Market Perform and announced a $91 price target.
The analyst is bullish on the stock following strong fourth-quarter FY23 earnings and the introduction of the 2024 outlook.
The oral care giant reported fourth-quarter FY23 sales growth of 7% year-on-year to $4.95 billion, beating the analyst consensus estimate of $4.89 billion and Base Business (non-GAAP) EPS of $0.87, beating the analyst consensus of $0.80.
The company expects FY24 net sales growth to be 1%-4%, including a low-single-digit negative impact from foreign exchange.
The analyst writes that the 2024 EPS outlook was below their expectations at the midpoint, leaving ample room for the company to boost guidance expectations as the year progresses.
The analyst says that Colgate-Palmolive is still in the early innings of improved top and bottom-line growth, balancing contribution from volume vs price, emerging markets vs developed, and across the product portfolio.
Tong expects the company to continue to drive sales growth ahead of its long-term target ranges and towards the upper end of peers, led by innovation, continued premiumization in Oral Care, and increased category penetration for Hill’s countering decelerating pet category growth.
The analyst maintained 2024 estimates for organic sales growth at +5% (+4% reported) and EPS at $3.46 (towards the company guidance’s upper end).
Tong projects volumes to be flat in the first quarter but turn positive starting the second quarter, pricing to be an outsized contributor for most of 2024, continued tailwinds for gross margin, and improvement in North American share.
However, the analyst sees risks in Latin America business from Argentina in FY24, which is expected to be more than offset by strength in Mexico and Brazil.
Apart from this, Wells Fargo analyst Chris Carey raised the price target to $88 from $80 and reaffirmed an Equal-Weight rating.
Also, UBS analyst Peter Grom raised the price target to $95 from $93 and reiterated a Buy rating, and Morgan Stanley analyst increased the price target to $93 from $85 and maintained an Overweight rating.
Price Action: CL shares are up 0.96% at $83.63 on the last check Monday.
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