Is growth on the horizon?
On October 11, 2017, SunTrust Robinson Humphrey upgraded Colgate-Palmolive (CL) stock to a “buy” from “hold” and increased the target price to $85.00 from $65.00 per share. Analyst William Chappell stated that higher demand in emerging markets, Colgate-Palmolive’s strong portfolio of market-leading brands, and favorable currency movement could help the company outperform its peers in the coming quarters. The company’s stock closed at $74.73 on October 11—up 2.5%. Recently, Morgan Stanley upgraded Colgate-Palmolive stock on similar grounds.
Looking at the company’s recent performance, Colgate-Palmolive is struggling in the developed markets including North America and Europe—reflected in lower organic volumes. The strong US (SPY) dollar dented the company’s financials. However, the impact of negative currency movement will likely subside, which could drive the company’s top-line growth in Europe.
Notably, Colgate-Palmolive is seeing improved sales in emerging markets, primarily in Latin America. Colgate-Palmolive is witnessing market share gains in Paraguay, Mexico, Peru, the Dominican Republic, and Puerto Rico. The company managed to maintain its leadership position in the toothpaste category in Latin America. Colgate-Palmolive’s sales are expected to benefit from increased volumes and higher pricing.
As for the Asia-Pacific region, Colgate-Palmolive’s sales are expected to get a boost from market stabilization in India. The market had been hit hard by the implementation of the goods and services tax and demonetization. However, soft demand in China (FXI) and increased competition in Thailand and Australia will remain a drag.
Rating summary and target price
The above graph shows that most analysts providing a recommendation on Colgate-Palmolive stock have a “neutral” outlook. Out of the 23 analysts, 78.0% recommended a “hold” and 22.0% recommended a “buy.”
Analysts have a target price of $77.05 per share on Colgate-Palmolive stock, which reflects an upside of 3.1% to the company’s closing price of $74.73 on October 11.