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Colgate-Palmolive: Analysts Maintain a ‘Hold’

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Sales and margins headwinds

Wall Street analysts continue to maintain a “neutral” outlook on Colgate-Palmolive (CL) stock. Analysts expect intense competition, a low category inflation rate, and unfavorable currency rates to continue to hurt the company’s sales growth rate. Meanwhile, higher raw material and packaging costs and increased transportation costs could have a negative impact on the company’s margins and bottom line.

Management also lowered its fiscal 2018 net sales and earnings guidance, which is disheartening for investors. Colgate-Palmolive expects its net sales to increase by low-single-digits in 2018—down from its previous guidance of mid-single digit growth.

Colgate-Palmolive’s management expects its adjusted earnings to mark mid-single-digit growth in 2018. Earlier, the company expected its bottom line to grow 10.0%.

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Amid challenges, Colgate-Palmolive’s price restructuring efforts across several markets, new products, expanded distribution, and benefits from recently acquired brand sales will likely support its net sales. Productivity, cost savings, and a lower effective tax rate should cushion the company’s bottom line.

Ratings and target price

Among 22 analysts covering Colgate-Palmolive stock, 15 analysts suggest a “hold,” six analysts maintain a “buy,” and one analyst has a “sell” recommendation. Analysts have a consensus target price of $69.20 per share on Colgate-Palmolive stock, which implies an upside of 3.1% based on its closing price of $67.10 on September 26.

Colgate-Palmolive stock trades at 22.1x the 2018 estimated EPS of $3.04 and at 20.8x the 2019 estimated EPS of $3.23—both look expensive based on the anticipated growth rates of 5.9% and 6.3%, respectively, during those periods.

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