Raymond James maintains Colgate stock Outperform with $110 target

Published 31/01/2025, 15:38
Raymond James maintains Colgate stock Outperform with $110 target

On Friday, Raymond (NSE:RYMD) James reaffirmed its Outperform rating on Colgate-Palmolive Company (NYSE:CL), a $70.3 billion consumer goods giant with impressive gross profit margins of 60.4%, setting a steady price target of $110.00. The company released its fourth-quarter results earlier today, revealing earnings per share (EPS) that slightly surpassed expectations, coming in at $0.91 compared to Raymond James’ estimate of $0.90 and the consensus of $0.89 from StreetAccount and Bloomberg. According to InvestingPro data, 9 analysts have recently revised their earnings downwards for the upcoming period. However, Colgate-Palmolive experienced a miss in organic sales growth and margins.

Colgate’s organic sales grew by 4.3% year-over-year, which did not meet the anticipated 5.9% from Raymond James and the 5.7% to 5.5% consensus range. The North American market performed as expected, showing a slight decline of 0.7%, but the company saw a slowdown in other regions, including Latin America, Europe, and its Hill’s brand, coupled with increased promotions in the Asia-Pacific region. Despite these challenges, InvestingPro analysis shows the company maintains strong fundamentals, including a 35-year streak of dividend increases and a current yield of 2.2%. In response to rising foreign exchange pressures, Colgate announced it would implement pricing adjustments in Latin America starting in the first quarter.

Analysts are keen to learn more about these pricing changes and their execution during the company’s earnings call, especially regarding their potential to improve volume through pricing and promotional strategies. Based on InvestingPro’s Fair Value analysis, the stock is currently trading at fair value, with an overall financial health score rated as "GOOD." Colgate’s outlook for 2025 aligns with expectations, projecting organic sales growth between 3% and 5% and anticipating foreign exchange to be a mid-single-digit drag on net sales. The company expects gross margins to widen and adjusted EPS to increase in the low-to-mid single digits. This forecast includes the impact of exiting private label pet nutrition but does not account for any tariff changes. Colgate-Palmolive manufactures some of its toothbrushes for the U.S. market in China and toothpaste in Mexico.

In other recent news, Colgate-Palmolive has seen significant developments. The company reported impressive gross profit margins of 60.4% and generated $20.1 billion in revenue over the last twelve months. A notable highlight was the 25% growth in the fourth quarter of 2024 by Colgate’s Hill’s pet nutrition brand, contributing to a significant portion of the company’s growth.

However, Stifel has adjusted Colgate-Palmolive’s stock target to $95, maintaining a hold rating. This adjustment comes after a review of recent sales data showing a deceleration in Colgate’s year-over-year growth to 2% in the fourth quarter of 2024. Despite the slowdown, the two-year compound annual growth rate remained largely consistent.

Deutsche Bank (ETR:DBKGn) also revised the price target for Colgate-Palmolive, bringing it down to $95 from the previous $100, due to anticipated foreign exchange headwinds and a slowdown in certain global markets. Looking ahead, for fiscal year 2025, Deutsche Bank predicts low single-digit adjusted EPS growth and has reduced the EPS forecast to $3.65, a decrease from the previous estimate of $3.77.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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