Colgate-Palmolive Company

CL Details

Colgate-Palmolive Company (NYSE: CL) is a consumer and household goods manufacturer. The company's operating segments include Oral, Personal and Home Care and Pet Nutrition. According to market share data, CL is the market leader in Oral Care, with global dominance in the toothpaste and manual toothbrush categories. Some of the brands sold by CL are Colgate, Darlie, Elmex, Hello, Meridol, Sorriso, and Tom's of Maine.

Latest News:

• Quarterly Dividend and Share Repurchase: The corporation declared a quarterly dividend of USD 0.47 (up by USD 0.02) per common share on March 10, 2022, payable on May 13, 2022, to shareholders of record on April 21, 2021. In addition, the CL board of directors approved a new repurchase programme of up to USD 5.0 billion, which will replace the existing USD 5.0 billion programmes authorized in FY 2018.

Q1FY22 Results:

• Flat Topline: In Q1FY22, CL reported YoY growth of 1.27% in Net sales to USD 4.40 billion from USD 4.34 billion in Q1FY21, attributable to decline in revenue from Oral, Personal and Home Care segment slightly offset by growth in Pet Nutrition.
• Reduction in Net Income: Net income for Q1FY22 reduced to USD 559 million compared to USD 681 million in Q1FY21.
• Cash and Debt Position: As of March 31, 2022, the company had cash & cash equivalents of USD 877 million and total debt (including notes payables) of USD 7.61 billion.
  

Key Risk:

• Exchange Rate Risk: Since CL sells its products in over 200 countries and territories, the company is subject to currency changes due to manufacturing and selling in currencies other than the US dollar.
• Commodity Price Risk: Price fluctuation of raw commodities utilized in production, such as essential oils, resins, tropical oils, pulp, tallow, corn, chicken, and soybeans, exposes the company to commodity price risk.

Outlook:

• FY22 Estimates: As of April 29, 2022, CL anticipates net sales growth of 1% to 4% in FY22, with a low-single-digit negative impact from foreign exchange. Organic revenue growth is now expected to be 4% to 6%, per the company. It also expects a lower gross profit margin, more advertising investment, and double-digit earnings-per-share growth on a GAAP basis.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

CL's stock price has decreased 6.80% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 72.20 to USD 85.61. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 85.24.

Considering the slight correction in the stock price, solid profitability margins, current valuation, and associated risks. We recommend a "Hold" rating on the stock at the current price of USD 77.39, down 4.72% as of April 29, 2022, at 12:06 PM PDT.

Three-Year Technical Price Chart (as on April 29, 2022, at 12:06 PM PDT). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

Note 3: The report publishing date is as per the Pacific Time Zone.

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