Why Colgate-Palmolive Stock Rose Yesterday
Morgan Stanley upgraded CL stock
After Morgan Stanley upgraded Colgate-Palmolive (CL) yesterday, the company’s stock rose more than 3.0%. The stock ended the day at $73.00, up 2.5%. Analyst Dara Mohsenian upgraded Colgate-Palmolive stock to “overweight” from an “underweight” rating and raised the target price to $84.00 per share from $75.00.
Analyst Mohsenian stated that the company’s current valuation and upside to sales makes it an attractive buying option “without paying the premium.” The analyst added that the company’s sales are expected to rebound, reflecting favorable YoY (year-over-year) comparables, rising sales in emerging markets, and currency tailwinds.
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YTD stock performance
Stock prices of consumer product companies are up modestly on a YTD (year-to-date) basis. However, category slowdown, primarily in North America, increased input costs and a challenging retail landscape remains a drag and is resulting in lower sales and profitability for these companies.
As for Colgate-Palmolive, the company’s stock took a beating in the past couple of months, reflecting declining sales, especially in developed markets including the US (SPY). Besides, the company’s profitability could be adversely affected by moderating category growth, increased competition, higher advertising and marketing expenses, and rising raw material costs. However, the company’s ability to raise prices, productivity savings, and the cost reduction measures are expected to cushion bottom-line growth. Also, the company is seeing improvement in sales in Europe and emerging markets, mainly Latin America.
Colgate-Palmolive stock is up by 11.6% on a YTD basis and has outperformed most of its peers in terms of price appreciation. In comparison, Procter & Gamble (PG), Church & Dwight (CHD), Clorox (CLX), and Kimberly-Clark (KMB) are up 10.3%, 9.7%, 8.7%, and 3.0%, respectively.
Moreover, during the same period, the S&P 500 Index (SPX-INDEX) was up by 11.5%, while the Consumer Staples Select Sector SPDR ETF (XLP) rose 5.0%.