Colgate-Palmolive Company

CL Details

Colgate-Palmolive Company (NYSE: CL) is a consumer and home goods manufacturer. The company's operating segments include Oral, Personal and Home Care and Pet Nutrition. According to market share statistics, CL is the world leader in Oral Care, with global dominance in the toothpaste and manual toothbrush categories. CL carries brands such as Colgate, Darlie, Elmex, Hello, Meridol, Sorriso, and Tom's of Maine.

Latest News:

• Dividend Announcement: Colgate-Palmolive Company's Board of Directors announced a quarterly cash dividend of USD 0.47 per common share on June 9, 2022, payable on August 15, 2022, to shareholders of record on July 21, 2022.

Q1 FY22 Results:

• Top-Line Growth: The company's net sales were USD 4.39 billion in Q1 FY22 from USD 4.34 billion, resulting in an increase of 1.5%driven by higher pricing in nearly every region, continuing its market share at 39.2% year to date.
• Margins vs Profitability: The company's net income fell to USD 603 million in Q1 FY22 from USD 728 million in Q1 FY21, owing to the effect of the third covid wave. However, the company's operational and net margins fell to 19.5% and 13.7%, respectively, higher than industry margins.
• Decent Balance Sheet: As of March 31, 2022, the company has USD 877 million in cash, compared to USD 832 million in December 2021. The Assets/Equity Ratio was 48.98x in Q1 FY22 compared to 24.70x in Q4 FY21, indicating a healthier balance sheet.

FY 22 Guidance

(Source: Company Filings)

Key Risks:

• Commodity Pricing Risk: Price changes in raw commodities utilized in production, such as essential oils, resins, tropical oils, pulp, maize, chicken, and soybeans, are the factors that possess much volatility and are a bit risky for a company’s profitability.
• Competition Risk: The Company faces stiff competition on a global scale. Furthermore, the significant rise in eCommerce has enticed new rivals and business strategies to enter the market. CL may be unable to predict the timing and scope of such activities or challenges from competitors, putting the company at risk.

 Valuation Methodology: Earnings Per Share-Based Relative Valuation

 Source: Analysis by Kalkine Group

Stock Recommendation:

Despite a turbulent operating climate throughout the world, the company reported another quarter of organic sales growth within the planned range of 3% to 5%. Higher pricing drove net sales up 1.5% and organic sales up 4.0% in practically every area. The company's efforts in innovation and digital skills are paying off, and sales growth should continue in future.

Considering the top-line growth, decent gross margins, robust ROE, positive FY22 outlook, favourable technicals, and present valuation. We recommend a “Buy" rating on the stock at the current market price of USD 75.95 as of June 13, 2022, at 07:01 AM PDT.

1-year technical chart as of June 13, 2022, at 07:01 AM PDT, Source: REFINITIV. Analysis by Kalkine group

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.