(CL) Colgate-Palmolive Company Reiterated at Neutral

We have maintained our long-term Neutral recommendation on the global consumer products company, Colgate-Palmolive Company (CL) with a target price of $115.00 following its fourth-quarter 2012 results. Moreover, shares of Colgate-Palmolive retain a Zacks Rank #3 (Hold).

Why the Reiteration?

Colgate-Palmolive commands a market-leading position in oral care and personal care product categories. We believe management’s continued focus on product innovation, globally recognized brands and broad international presence in both developed and emerging markets facilitates the company to take advantage of growth opportunities and thereby augment profitability.

The company posted fourth-quarter 2012 adjusted earnings of $1.41 per share that came a penny ahead of the Zacks Consensus Estimate and jumped 8.5% year over year.

The company’s adjusted gross profit margin expanded 90 basis points (bps) to 58.6%, driven by increased prices as well as cost savings from the company’s funding-the-growth initiatives. Moreover, adjusted operating profit climbed 6% to $1,035 million, while operating margin expanded 80 bps to 24.1%.

Looking ahead, Colgate-Palmolive anticipates that growth momentum will continue in fiscal 2013 with gross margin expansion and double-digit growth in earnings per share. However, lingering macroeconomic concerns in Venezuela will remain a drag on its financials in the coming quarters.

In addition, intense competition and sluggish economic recovery may undermine the company’s growth prospects.

Other Stocks to Consider

Until any further upward revision in Colgate-Palmolive’s Zacks Rank, other stocks in the consumer products industry that are worth considering include Proctor & Gamble Company (PG), Church & Dwight Company Inc. (CHD) and The Clorox Company (CLX), all having a favorable Zacks Rank #2 (Buy).

CHURCH & DWIGHT (CHD): Free Stock Analysis Report

COLGATE PALMOLI (CL): Free Stock Analysis Report

CLOROX CO (CLX): Free Stock Analysis Report

PROCTER & GAMBL (PG): Free Stock Analysis Report

Zacks Investment Research


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