Colgate-Palmolive (NYSE: CL) reported its Q1 outcomes on April 26, with revenues and earnings above the road estimates. The corporate reported $5.1 billion income and $0.86 adjusted earnings per share, in comparison with the consensus estimates of $5.0 billion and $0.82, respectively. Regardless of its upbeat outcomes, we predict CL inventory is absolutely valued at $93. On this observe, we focus on Colgate-Palmolive’s inventory efficiency, key takeaways from its current outcomes, and valuation.
Firstly, allow us to have a look at Colgate-Palmolive’s inventory efficiency. CL inventory has witnessed beneficial properties of 10% from ranges of $85 in early January 2021 to round $95 now, vs. a rise of about 40% for the S&P 500 over this roughly three-year interval.
Nevertheless, the rise in CL inventory has been removed from constant. Returns for the inventory have been 0% in 2021, -8% in 2022, and 1% in 2023.
As compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that CL underperformed the S&P in 2021 and 2023. The truth is, persistently beating the S&P 500 — in good instances and unhealthy — has been tough over current years for particular person shares; for heavyweights within the Shopper Staples sector together with WMT, PG, and COST, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has outperformed the S&P 500 every year over the identical interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less danger versus the benchmark index; much less of a roller-coaster experience, as evident in HQ Portfolio performance metrics.
Given the present unsure macroeconomic setting with excessive oil costs and elevated rates of interest, might CL face an analogous state of affairs because it did in 2021 and 2023 and underperform the S&P over the following 12 months — or will it see a powerful soar? From a valuation perspective, we imagine CL inventory is appropriately priced. We estimate Colgate-Palmolive’s Valuation to be $91 per share, near its present market worth of $93. Our forecast relies on slightly over 26x P/E a number of for CL and anticipated earnings of $3.43 on a per-share and adjusted foundation for the total yr 2024. The 26x determine aligns with the inventory’s common P/E a number of over the past three years.
Colgate-Palmolive’s income of $5.1 billion in Q1 was up 6% y-o-y, led by a 7% progress in Oral, Private, and House Care and a 4% rise in Pet Vitamin phase gross sales. On an natural foundation, gross sales have been up 9.8% y-o-y, pushed by an 8.5% pricing progress and 1.3% quantity beneficial properties. The corporate additionally noticed its adjusted working margin broaden by 170 bps to 21.4%. Larger revenues and margin enlargement resulted in adjusted earnings per share progress of 18% to $0.86 in Q1’24, in comparison with $0.73 within the prior-year quarter.
Trying ahead, Colgate-Palmolive expects its natural gross sales to rise between 5% and seven% and the adjusted earnings to rise in mid-to-high single-digits. It reported gross sales of $19.5 billion and adjusted earnings per share of $3.23 in 2023. General, the corporate is predicted to navigate effectively within the close to time period, led by pricing beneficial properties in addition to quantity progress in each – Oral, Private, and House Care, and Pet Vitamin segments. That mentioned, we predict a lot of those positives are already priced in, and buyers prepared to enter will probably be higher off ready for a dip to garner strong long-term beneficial properties.
| Returns | Might 2024 MTD [1] |
2024 YTD [1] |
2017-24 Complete [2] |
| CL Return | 2% | 17% | 43% |
| S&P 500 Return | 3% | 9% | 132% |
| Trefis Strengthened Worth Portfolio | 3% | 3% | 632% |
[1] Returns as of 5/7/2024
[2] Cumulative whole returns because the finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
