Stifel has upgraded Colgate-Palmolive (NYSE:CL) to 'buy' on Monday, even though it reduced the price target by 5% to $81, indicating a potential 14% upside from the closing price of $70.95 last Friday, as per InvestingPro data. This move comes as the company's stock has witnessed a nearly 10% drop this year, which is in line with InvestingPro's data that shows a year-to-date price total return of -8.23%.
Mark Astrachan, an analyst at Stifel, attributes the upgrade to multiple factors. These include an anticipated strong performance from Hill's pet food division, weaker inflation, and expected robust pricing power that could expand Q3 gross margins and boost sales in 2023, subsequently contributing to EBIT/EPS growth. This aligns with InvestingPro Tips, which highlights Colgate-Palmolive's impressive gross profit margins and its high return on assets.
Stifel also forecasts potential growth for Colgate-Palmolive, predicting a 5%-7% organic sales increase in 2023. This projection is substantiated by the company's recent revenue growth of 5.51% as reported by InvestingPro. The firm expects the company's Q3 margin expansion to be driven by falling inflation, pricing benefits, productivity improvements, carryover pricing, and an increase in toothpaste market share.
Despite these positive projections, Stifel lowered its EPS estimates for 2023-2024 due to worsening foreign exchange rates. Astrachan believes that Colgate-Palmolive is trading at a historical discount compared to its peers. This is reflected in the company's P/E ratio of 39.98, as per InvestingPro data.
Morgan Stanley (NYSE:MS) echoed Stifel's positive sentiment with an overweight recommendation and a higher price target of $89 for Colgate-Palmolive. They cited the company's science-based market positioning as a long-term growth strategy for the Hill's division. This is supported by the InvestingPro Tip that notes the company's revenue growth has been accelerating.
Colgate-Palmolive's Q3 results are due on October 27, with projections at an adjusted 80 cents per share on $4.8 billion revenue. In the second quarter of 2023, the pet nutrition segment significantly contributed to the company's growth. This aligns with the InvestingPro data, which shows a quarterly revenue growth of 7.54% for 2023 Q2.
For those interested in more insights like these, there are 16 additional InvestingPro Tips available for Colgate-Palmolive at InvestingPro.
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