Shares of global dealer in consumer goods, Colgate-Palmolive Co. (CL) hit a 52-week high of $69.89 yesterday, before closing at $69.65 and amassing a year-to-date return of 9.5%.
Shares have been gaining momentum, driven by the company’s solid fundamentals, as evident from Colgate-Palmolive’s market-leading position in oral care and personal care product categories.
We believe that the company’s continued focus on product innovation, along with globally recognized brands and presence in both developed and emerging economies facilitate the exploitation of growth opportunities and consequently boost its profitability.
This is also evident from Colgate-Palmolive’s first-quarter 2014 results, wherein adjusted earnings per share came in at 68 cents, up 3% year over year and in line with the Zacks Consensus Estimate. Shares have risen 5.4% since the earnings release.
Additionally, Colgate-Palmolive has always followed a disciplined capital allocation strategy that focuses on making investments to develop business while using the excess cash to enhance shareholder returns through dividend payouts and share buybacks.
In the first quarter, the company generated $820 million of cash from operations, paid a total dividend of $316 million and bought back shares worth $453 million. Colgate-Palmolive has been regularly increasing its dividend every year since 2001 and presently pays an annual cash dividend of $1.44.
The company’s strong cash generation ability has also enabled it to reduce long-term debts. These factors reflect the company’s sound financial status and instill confidence among investors about the stock.
Moreover, the long term EPS growth rate of this company – which competes withThe Procter & Gamble Co. (PG) – is in line with the peer group average of 8.9%. Also, the last traded price is 0.7% below the Zacks Consensus average analyst price target of $70.17, leaving further room for an upside.
However, as lingering macroeconomic headwinds in Venezuela and Argentina remain a matter of concern, the company currently carries a Zacks Rank #4 (Sell).
Apart from Colgate-Palmolive, Time Warner Inc. (TWX) and The Walt Disney Company (DIS) also hit 52-week highs of $73.07 and $87.29, respectively on Jul 9, 2014.
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