Colgate-Palmolive Company
CL Details
Colgate-Palmolive Company (NYSE: CL) is a manufacturer of consumer and household goods. Oral, Personal and Home Care, and Pet Nutrition are the company's operating segments. According to market share data, CL is the world leader in Oral Care, with global domination in the toothpaste and manual toothbrush categories. Colgate, Darlie, Elmex, Hello, Meridol, Sorriso, and Tom's of Maine are some of the brands sold by CL.
Latest News:
- Quarterly Dividend and Share Repurchase: On March 10, 2022, the company declared a quarterly dividend of USD 0.47 per common share (increased by USD 0.02), payable on May 13, 2022, to shareholders of record on April 21, 2021. In addition, the CL board of directors approved a new USD 5.0 billion repurchase programme to replace the existing USD 5.0 billion repurchase programmes authorized in FY 2018.
Q1FY22 Results:
- Flat Topline: In Q1FY22, CL reported YoY growth of 1.27% in Net sales to USD 4.40 billion from USD 4.34 billion in Q1FY21, attributable to decline in revenue from Oral, Personal and Home Care segment slightly offset by growth in Pet Nutrition.
- Reduction in Net Income: Net income for Q1FY22 reduced to USD 559 million compared to USD 681 million in Q1FY21.
- Cash and Debt Position: As of March 31, 2022, the company had cash & cash equivalents of USD 935 million and total debt (including notes payables) of USD 7.61 billion.
Key Risk:
- Exchange Rate Risk: CL is subject to currency fluctuations because it sells its products in over 200 nations and territories and manufactures and sells in currencies other than the US dollar.
- Commodity Price Risk: The company is exposed to commodity price risk due to price fluctuations in raw commodities used in production, such as essential oils, resins, tropical oils, pulp, tallow, corn, poultry, and soybeans.
Outlook:
- FY22 Estimates: CL expects net sales growth of 1% to 4% in FY22, with a low-single-digit negative impact from the foreign exchange as of April 29, 2022. According to the company, organic revenue growth will range from 4% to 6%. On a GAAP basis, it also anticipates a reduced gross profit margin, increased advertising spending, and double-digit earnings-per-share growth.
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
CL's stock price has decreased 5.09% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 72.20 to USD 85.61. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 82.87.
Considering the slight correction in the stock price, solid profitability margins, current valuation, and associated risks. We recommend a "Hold" rating on the stock at the closing price of USD 75.12, down 0.78% as of May 19, 2022.
Three-Year Technical Price Chart (May 19, 2022). Source: REFINITIV, Analysis by Kalkine Group
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: All forecasted figures and industry information have been taken from REFINITIV.
Note 3: The report publishing date is as per the Pacific Time Zone.
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