Colgate Shines on Upgrade

Colgate-Palmolive (NYSE:CL) saw shares gain ground Monday after Morgan Stanley analysts upgraded the stock to overweight from equal weight. The Wall Street investment firm said the recent dropdown in shares create an attractive entry point for investors.

Equity analyst Dara Mohsenian advised clients that the stock’s approximately 10% pullback to start 2023 has created an opportunity for investors with a beatable sales guide in 2023 and promising opportunities in segments like the pet business. Additionally, its pricing power, with hikes outpacing Procter & Gamble and Kimberly-Clark Corporation is underappreciated in his view.

“With higher pricing and weaker consumer spending, trade-down risk is building for HPC companies, but we actually see trade-down as a modest positive for CL, in direct contrast to most CPG peers,” Mohsenian wrote.

“Based on U.S. scanner data, CL's products are at a -17% discount to its product categories as shown below, in direct contrast to large premiums at most peers except [Church & Dwight]

Mohsenian moved his rating on Colgate-Palmolive to Overweight from a prior Buy and assigned it top pick status. An $82 price target was set for the stock.

Its newest financial figures came down last Friday, revealing fourth-quarter net sales increased 5.0%, Organic sales increased 8.5%

Full Year 2022 Net sales increased 3.0%, Organic sales increased 7.0%

Said CEO Noel Wallace, “We are very pleased to have finished 2022 with a continuation of our strong growth momentum, as 2022 was our fourth consecutive year delivering organic sales growth at or above our 3% to 5% long-term targeted range.”

CL shares picked up $1.46, or 2%, to $73.05.