Fitch Affirms Colgate-Palmolive's Ratings - Analyst Blog

By Zacks Equity Research,

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On Jul 26, 2013, Fitch Ratings affirmed its long-term and short-term Issuer default ratings (IDRs) of Colgate-Palmolive Co. ( CL ) at 'AA-'and 'F1+' respectively, together with the outlook on the company at 'Stable'.

Apart from IDRs, Fitch confirmed its ratings on Colgate-Palmolive's senior unsecured notes at 'AA-'; commercial paper (CP) program at 'F1+' and $1.85 billion revolving credit facility at 'AA-'.

Rating Rationale

Fitch's rating was based on Colgate-Palmolive's strong revenues in the trailing 12 months, a robust operating performance, substantial liquidity and the company's leading presence in some of the world's largest markets.

Colgate-Palmolive generated revenues worth nearly $17 billion in the last 12 months ended Jun 30, 2013. Further, the company's EBITDA margins were around 26%, at par with other major consumer care manufacturers. Fitch expects that the adjusted margins will increase once the company implements its Global Growth and Efficiency Program through 2016.

Colgate-Palmolive has ample liquidity as the company generated more than $1 billion in annual free cash flow since 2009. The rating agency anticipates future cash flow to remain around the $1 billion mark, even though the company is required to shell out about $200 million for restructuring charges and capital expenditures.

Further, Fitch affirmed the stable outlook based on the company's cash generation, profitability levels, and the credit protection measures, which is expected to continue in the near future.

Fitch's reaffirmation comes a day after Colgate-Palmolive reported its 2Q13 results. We believe that the company's industry leading position and focus on emerging markets will help augment sales and margins. The company's second-quarter 2013 adjusted earnings of 70 cents a share came in line with the Zacks Consensus Estimate and rose 4.0% from the year-ago quarter's adjusted earnings.

Looking ahead, Colgate-Palmolive anticipates its growth momentum to continue into 2013 as it remains on track with its global restructuring program. Further, the company's stringent focus on the funding-the-growth programs and strategic worldwide pricing endeavors should help boost its bottom line.

The company expects strong organic sales as well as gross margin expansion in 2013. The company projects 4.5% to 5.5% growth in earnings per share for 2013.

Other Stocks to Consider

Colgate-Palmolive currently carries a Zacks Rank #3 (Hold). Other stocks in the same industry that are worth considering include Nu Skin Enterprises Inc. ( NUS ), Church & Dwight Co. Inc. ( CHD ) and Reckitt Benckiser Group plc ( RBGLY ). While Nu Skin carries a Zacks Rank #1 (Strong Buy), Church & Dwight and Reckitt Benckiser have a Zacks Rank #2 (Buy).

CHURCH & DWIGHT (CHD): Free Stock Analysis Report

COLGATE PALMOLI (CL): Free Stock Analysis Report

NU SKIN ENTERP (NUS): Free Stock Analysis Report


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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CHD , CL , CP , NUS , RBGLY

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