We have maintained our long-term Neutral recommendation on Colgate-Palmolive Company (CL), a global consumer products company with a target price of $64.00.
Why the Reiteration?
Colgate-Palmolive commands a 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 facilitate the company to take advantage of growth opportunities and thus drive profitability.
This is evident from Colgate-Palmolive’s results in the recently concluded quarter. The company posted second-quarter 2013 adjusted earnings of 70 cents per share, up 4% year over year and in line with the Zacks Consensus Estimate.
The company’s adjusted gross profit margin expanded 70 basis points (bps) to 58.6%, driven by increased prices and cost savings initiatives. Moreover, adjusted operating profit climbed 3% to $1,032 million, while operating margin expanded 20 bps to 23.7%.
Looking ahead, Colgate-Palmolive anticipates the growth momentum to continue as it remains on track with its global restructuring program, funding-the-growth initiatives and strategic worldwide pricing schemes. In 2013, the company which competes with Church & Dwight Co. Inc. (CHD) expects strong organic sales and gross margin expansion, coupled with 4.5%–5.5% growth in earnings per share.
However, lingering macroeconomic concerns in Venezuela will likely remain a drag on Colgate-Palmolive’s financials in the coming quarters. In addition, intense competition and a sluggish economic recovery may undermine the company’s growth prospects.
Other Stocks to Consider
Currently, Colgate-Palmolive carries a Zacks Rank #4 (Sell). Till any upward revision occurs in Colgate-Palmolive's Zacks Rank, other stocks worth considering in the consumer staples sector include Hillenbrand, Inc. (HI) and Service Corp. International (SCI). Both the stocks carry a Zacks Rank #2 (Buy).
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