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Colgate to Buy Hello Brand, Expand Natural Products Line

Zacks Equity Research

Colgate-Palmolive Company CL has agreed to acquire Hello Products LLC, a leading oral care brand in the United States that produces eco-friendly and organic products. Hello’s products include adult and kids toothpaste, mouth rinse, toothbrushes and floss. The brand’s products, which have a distinct position in the market, are extremely popular with young consumers and across the broader segment. Further, the brand fully complements the company’s Tom’s of Maine and Colgate brands.

Colgate plans to finance the deal with a combination of cash and debt. The company anticipates closing the transaction by February 2020. Following the completion of the acquisition, Hello’s founder Craig Dubitsky and CEO Lauri Kien Kotcher will continue to lead the brand.

The company expects the acquisition to be flat to a penny dilutive to 2020 earnings per share, after including transaction costs. The terms of the deal were not disclosed.

Colgate is on track with product innovation and in-store implementation, which have been key aspects of its growth strategies for years. The company’s innovation strategy is focused on growing adjacent categories and product segments.

Further, it remains focused on the premiumization of its Oral Care portfolio through major innovation. The company has a solid innovation pipeline in the next few quarters, which includes the launch of Optic White. Additionally, it continues to expand Naturals toothpaste and prescription diet. In fact, the Naturals range is a key area of focus for the company in personal and home care categories.

Also, Colgate continues to expand portfolio by introducing pharmacy brands like elmex and meridol to newer markets. It is impressed with the performance of its professional skincare businesses — Elta MD and PCA Skin — in spas and dermatologists. In addition, the company is on track to expand the premium skincare portfolio with the buyout of the Filorga skincare business. It is also expanding product availability through the e-commerce channel.

We note that, shares of this Zacks Rank #2 (Buy) company have gained 3.2% in the past three months, compared with the industry’s growth of 0.8%.

3 Other Stocks to Consider

Helen of Troy Limited HELE presently has an expected long-term earnings growth rate of 9.3% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Procter & Gamble Company PG has a long-term earnings growth rate of 7.5% and carries a Zacks Rank #2.

The Estee Lauder Companies Inc. EL has a long-term earnings growth rate of 12.8%. Currently, it carries a Zacks Rank #2.

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The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
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