Colgate-Palmolive Has Strong Brand-Building And Analytics-Driven Marketing Strategy, Says Analyst

BofA Securities analyst Bryan Spillane reiterated a Buy rating on the shares of Colgate-Palmolive Company CL and raised the price target from $90 to $100.

CL opened the year with organic sales growth of +9.8% and high-quality EPS of $0.86 versus the analyst's estimate of $0.82.

Pricing growth of +8.5% exceeded the analyst's forecast by +410 basis points, helping deliver 330 basis points of gross margin expansion that drove the +150 basis points beat vs the analyst's estimates.

Hyperinflation in Argentina, Africa, and the Mid-East was largely responsible for the upside as evidenced by the widest outperformance by segment in Latam and Africa/Eurasia.

Share gains in North America is a testament to Colgate's brand-building and analytics-driven marketing strategy.

The analyst highlighted both EPS outperformance and meaningfully higher marketing spend, to which management attributed the favorable market share gains across markets, including the U.S.

For the second quarter, the analyst forecasts an organic growth of +5.8% Y/Y, noting easier North America comps and China improvement but less Latam pricing, with $0.85 of EPS. 

For FY24, the analyst raised the organic sales growth estimate from +4.5% to +6.5%, mostly on higher pricing to offset incremental FX and keep EPS of $3.50 unchanged.

The increased price target implies a target P/E multiple of 26.5x to the analyst's FY25e EPS.

It represents a 2.5x increase and a 30% premium to peers above the flat historical average, supported by favorable volume trends, pricing, and margin power as market share momentum continues to build.

Price Action: CL shares are trading lower by 0.87% at $90.22 at the last check Monday.

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