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RBC Capital Markets Downgraded Colgate-Palmolive

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Jan. 5 2016, Updated 3:23 p.m. ET

Price movement of Colgate-Palmolive

Colgate-Palmolive (CL) has a market cap of $58.0 billion. Its YTD (year-to-date) price movement was a mix of rises and falls in fiscal 2015. After RBC Capital Markets downgraded the stock to “Sector Perform” from “Outperform,” CL fell by 2.9% to close at $64.71 per share as of January 4, 2016. The price movement on a weekly, monthly, and YTD basis is -3.4%, -1.5%, and -2.9%, respectively.

Technically, the stock has broken support levels and is trading below all moving day averages. Currently, CL is trading 2.8% below its 20-day moving average, 3.0% below its 50-day moving average, and 2.2% below its 200-day moving average.

The Consumer Staples Select Sector SPDR Fund (XLP) invests 3.4% of its holdings in Colgate-Palmolive. The ETF tracks a market-cap-weighted index of consumer staples stocks from the S&P 500.

The Vanguard Consumer Staples ETF (VDC) invests 3.1% of its holdings in Colgate-Palmolive. The ETF tracks a market-cap-weighted index of stocks in the Consumer Staples sector of the US market.

The market caps of Colgate-Palmolive (CL) and its competitors are as follows:

  • Procter & Gamble (PG): $213.2 billion
  • Clorox (CLX): $16.2 billion
  • Church & Dwight (CHD): $11.0 billion
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Performance of Colgate-Palmolive in 3Q15

Colgate-Palmolive (CL) reported net sales of $4.0 million, a fall of 8.7% when compared to net sales of $4.4 million in 3Q14. Its non-GAAP net income and non-GAAP EPS (earnings per share) fell to $653.0 million and $0.72, respectively, in 3Q15, as compared to non-GAAP net income and non-GAAP EPS of $701.0 million and $0.76, respectively, in 3Q14.

Meanwhile, cash and cash equivalents rose by 36.4% while inventories fell by 3.5% in fiscal 3Q15 on a quarterly basis.

On January 4, 2016, RBC Capital Markets downgraded the stock from “Outperform” to “Sector Perform.” The company is facing difficulty in forecasting consumer demand for its Brazil segment.

Colgate-Palmolive and its peers

Now, we’ll compare Colgate-Palmolive to its industry peers as of January 4, 2016, in terms of a few key metrics.

First, let’s compare CL and its peers based on PE (price-to-earnings) ratio:

  • Colgate-Palmolive: 24.0x
  • Procter & Gamble: 25.8x
  • Clorox: 26.2x
  • Church & Dwight Co: 27.6x

Next, let’s see how CL compares with its peers based on PS (price-to-sales) ratio:

  • Colgate-Palmolive: 3.6x
  • Procter & Gamble: 2.9x
  • Clorox: 2.8x
  • Church & Dwight: 3.2x

According to the above findings, Colgate-Palmolive’s peers are ahead based on PE. However, Colgate-Palmolive has outperformed its peers based on PS.

Comparing Colgate-Palmolive and its ETFs

Now let’s look at CL compared to its ETFs:

  • The YTD price movements of CL, XLP, and VDC are -2.9%, 6.9%, and 5.8%, respectively.
  • The PE ratios CL, XLP, and VDC are 24.0x, 22.2x, and 22.8x, respectively.

According to the above findings, these ETFs are ahead of Colgate-Palmolive based on price movement. However, Colgate-Palmolive has outperformed these ETFs based on PE.

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