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Recovery in Colgate-Palmolive Stock Could Be Short-Lived

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Colgate-Palmolive (CL) stock outperformed the broader markets in November and increased 6.7%. In comparison, the S&P 500 Index increased 1.8% during the same period. However, the recovery in Colgate-Palmolive stock could be short-lived. Near-term sales and margin headwinds are expected to remain a drag.

Colgate-Palmolive’s top line is projected to remain low during the fourth quarter, which reflects the negative impact from currency rates and challenging market conditions in China and Brazil. However, management expects that the company’s fourth-quarter organic sales could rise due to higher pricing and less destocking.

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Besides soft sales, Colgate-Palmolive’s profit margins are also expected to remain weak. Higher packaging and raw material costs are expected to more than offset the benefits from cost-savings and higher pricing. Analysts expect Colgate-Palmolive’s fourth-quarter EPS to decline on a year-over-year basis due to lower sales and weak margins.

Analysts’ ratings

Most of the analysts maintained a “neutral” rating on Colgate-Palmolive stock. Among the 21 analysts covering the stock, 15 recommended a “hold,” four recommended a “buy,” and two recommended a “sell.” Analysts have a consensus target price of $62.88 per share on Colgate-Palmolive stock, which is roughly on par with its closing price on December 4.

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