Valuation to limit upside
Colgate-Palmolive’s (CL) improved organic sales and better-than-expected earnings have boosted its stock in the past two quarters. However, the stock’s high valuation could limit any upside, given that the company’s EPS are expected to fall this year.
We expect Colgate-Palmolive’s adjusted earnings to remain subdued in the coming quarters, reflecting margin headwinds. Although analysts forecast that its bottom line could stabilize in 2020, its projected mid-single-digit percentage growth makes its current valuation unattractive.
Ratings and price target
Of the 22 analysts covering Colgate-Palmolive, 13 recommend “hold,” six recommend “buy,” and three recommend “sell.” Their target of $70.73 for the stock implies a 3.7% downside based on its June 17 price of $73.41.
Wall Street also has a neutral outlook on CL’s peers, with continued margin pressure and unattractive valuation multiples keeping analysts on the sidelines. Most analysts covering Kimberly-Clark (KMB), Procter & Gamble (PG), Clorox (CLX), and Church & Dwight (CHD) stock recommend “hold.”