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Colgate Retains Neutral View

Zacks Equity Research

We have maintained our long-term Neutral recommendation on the global consumer products company, Colgate-Palmolive Company (CL) with a target price of $127.00, following its first-quarter 2013 results. Moreover, shares of Colgate-Palmolive carry 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 facilitate the company to take advantage of growth opportunities and thereby augment profitability.

This is evident from the company’s recent concluded quarter. The company posted first-quarter 2013 adjusted earnings of $1.32 per share, up 6% year over year and in line with the Zacks Consensus Estimate.

The company’s adjusted gross profit margin expanded 40 basis points (bps) to 58.6%, driven by increased prices and cost savings from the company’s funding-the-growth initiatives. Moreover, adjusted operating profit climbed 4% to $985 million, while operating margin expanded 20 bps to 22.8%.

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 expects strong organic sales and gross margin expansion, coupled with 5.5% to 6.5% 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 staples industry that are worth considering include Nu Skin Enterprises Inc. (NUS), ZEP Inc. (ZEP)  and Avon Products Inc. (AVP). Of these, Nu Skin holds a Zacks Rank #1 (Strong Buy) while ZEP and Avon carry a Zacks Rank #2 (Buy).

Read the Full Research Report on CL

Read the Full Research Report on AVP

Read the Full Research Report on ZEP

Read the Full Research Report on NUS

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