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Colgate Soars to New Highs - Analyst Blog

Posted
2/20/2013 10:30:00 AM
By: Zacks.com
Referenced Stocks:CL;CLX;ECL;PG

The shares of Colgate-Palmolive Co. ( CL ) reached a new 52-week high of $112.04 on Wednesday, Feb 19, gaining momentum from the company's consistent performance as well as an encouraging outlook. This Zacks Rank #3 (Hold) global consumer products company eventually closed at $111.91 yesterday, recording a healthy return of 19.9% over the past year. Average volume of shares traded over the last 3 months stands at approximately 1,551,190.

Drivers that Triggered Momentum

An impressive record of either meeting or beating the quarterly earnings expectations, a positive fiscal 2013 outlook and a decent dividend yield are the factors that enabled the shares of Colgate to reach a new high.

With respect to earnings surprises, Colgate has either met or surpassed the Zacks Consensus Estimate for the last several quarters, most recently topping it by 0.71% in the fourth quarter of fiscal 2012.

On Jan 31, Colgate posted impressive quarterly results with strong earnings and sales comparisons for the fourth quarter of fiscal 2012. The company posted adjusted earnings of $1.41 per share that came a penny ahead of the Zacks Consensus Estimate and jumped 8.5% year over year.

Global sales of $4,286 million inched up nearly 2.7% from the prior-year quarter's level of $4,172 million, primarily benefiting from a 2.5% upside in pricing and 1.5% increase in global unit volumes (excluding divested businesses), partially offset by a negative impact of 1.5% from foreign exchange.

The company's adjusted gross profit margin expanded 90 basis points (bps) to 58.6%, driven by increased prices as well as cost savings from the company's funding-the-growth initiatives.

Looking ahead, Colgate-Palmolive anticipates that growth momentum will continue in fiscal 2013 with gross margin expansion and double-digit growth in earnings per share. However, lingering macroeconomic concerns in Venezuela will remain a drag on its financials in the coming quarters.

Colgate is also known for its shareholder friendly moves. The company has been regularly increasing its dividend every year since 2001, currently paying out annual cash dividend of $2.48. This currently yields a solid 2.2%, while the company has a payout ratio of 47%.

Besides Colgate, other consumer products companies like Ecolab Inc. ( ECL ), The Clorox Company ( CLX ) and Procter & Gamble Company ( PG ) focus on improving shareholder value by paying regular quarterly dividends.

Stock's Key Indicators

Colgate currently trades at a forward P/E of 19.2x, at par with the peer group average. Its price-to-sales ratio of 3.1 is significantly above the peer group average of 1.9. Moreover, the company's return-on-equity (ROE) and return-on-investment (ROI) are 101.9% and 41.6%, respectively, which are notably higher than the peer group average. The company's strong fundamentals are well supported by its long-term estimated EPS growth rate of 9.4%.



COLGATE PALMOLI (CL): Free Stock Analysis Report

CLOROX CO (CLX): Free Stock Analysis Report

ECOLAB INC (ECL): Free Stock Analysis Report

PROCTER & GAMBL (PG): Free Stock Analysis Report

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