We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Colgate-Palmolive (CL) be a Good Investment for 2017?
Read MoreHide Full Article
Consumer staples bellwether, Colgate-Palmolive Co. (CL - Free Report) has been an investor’s favorite for a long time as the stock offers significant long-term growth potential backed by its globally recognized brands, worldwide presence, product innovation and marketing. However, the stock that was gaining since the start of 2016 has begun to slide in the past six months, mainly due to the macroeconomic challenges and currency headwinds, which have been hurting its top line.
Colgate’s shares have declined over 6% in the last six months, underperforming the Zacks categorized Soap & Cleaning Preparations industry’s fall of 3.1% in the same time frame.
Top-Line Perils
Colgate has reported lower-than-expected sales in 13 of the last 14 quarters. Moreover, for over two years now, the company’s top-line has witnessed a year-over-year decline. The soft sales performance primarily stems from its exposure to the aforementioned perils of operating in international markets, from where it generates around 75% of its revenues.
In the last reported quarter, the company’s total sales declined 3.3% year over year and missed estimates as the negative currency rates and fall in global volumes offset the increase in prices. Further, Colgate expects the macroeconomic headwinds and currency woes to linger and weigh on its top line in 2016. Hence, it expects net sales for 2016 to decrease in low to mid-single digits range.
Earnings Momentum Solid
Though the company’s top-line is hindered by the aforementioned factors, its earnings surprise history reveals a completely opposite picture. Colgate has a strong tradition of either meeting or beating estimates. The company posted in-line earnings for third-quarter 2016, thus maintaining its trend of beating and meeting estimates in alternate quarters for the fifth straight time.
Moreover, earnings improved 1% year over year despite the prevalence of strong currency headwinds, deconsolidation of Venezuelan operations and other tough economic conditions. The strong results were backed by better pricing, emerging market growth and cost-savings from the funding-the-growth and 2012 Restructuring Program.
Growth Initiatives Backing the Stock
This earnings momentum is primarily driven by the company’s focus on its funding-the-growth initiatives that is aiding in cost reduction, and improving the company’s gross and operating margins. The funding-the-growth and 2012 Restructuring initiatives are aimed at reducing structural costs, standardizing processes, opening new distribution centers, improving decision making, enhancing market share and consequently, contributing significantly to the improvement of gross and operating margins over the long term. Additionally, the company remains focused on continually improving profitability through the growth of its higher-margin businesses.
Furthermore, the company adheres to its innovation and marketing strategy to bolster sales. On this front, Colgate launches numerous oral care and personal care products every quarter, which are expected to benefit its sales in the following quarters. Some of the recent product launches include new variants of toothpaste, Colgate Optic White variants, toothbrushes, Colgate 360 Charcoal Gold and Colgate Slim Soft Sensitive Gum Care.
Additionally, Colgate has always followed a disciplined capital allocation strategy that focuses on making investments to develop business, while using the excess cash to enhance shareholder returns through dividend payouts and share buybacks, owing to its strong cash generation ability. This highlights its financial flexibility, which should definitely draw investors’ attention.
Bottom Line
Though Colgate currently carries a Zacks Rank #4 (Sell), we believe the company has it all to bounce back and outperform the market. Aptly, it has a Growth Style Score of “A”. We believe the company’s potential lies in its ability to successfully execute its funding-the-growth plan and at the same time, as it promises, striving to bring a smile on everyone’s face with its innovative oral products.
Dean Foods, with a long-term earnings growth rate of 12%, has surged nearly 25.8% year to date.
Ollie's Bargain has gained a whopping 77.5% year to date. Moreover, it has a long-term earnings growth rate of 18.9%.
B&G Foods has jumped 26.8% year to date. The stock has a long-term earnings growth rate of 8%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Will Colgate-Palmolive (CL) be a Good Investment for 2017?
Consumer staples bellwether, Colgate-Palmolive Co. (CL - Free Report) has been an investor’s favorite for a long time as the stock offers significant long-term growth potential backed by its globally recognized brands, worldwide presence, product innovation and marketing. However, the stock that was gaining since the start of 2016 has begun to slide in the past six months, mainly due to the macroeconomic challenges and currency headwinds, which have been hurting its top line.
Colgate’s shares have declined over 6% in the last six months, underperforming the Zacks categorized Soap & Cleaning Preparations industry’s fall of 3.1% in the same time frame.
Top-Line Perils
Colgate has reported lower-than-expected sales in 13 of the last 14 quarters. Moreover, for over two years now, the company’s top-line has witnessed a year-over-year decline. The soft sales performance primarily stems from its exposure to the aforementioned perils of operating in international markets, from where it generates around 75% of its revenues.
In the last reported quarter, the company’s total sales declined 3.3% year over year and missed estimates as the negative currency rates and fall in global volumes offset the increase in prices. Further, Colgate expects the macroeconomic headwinds and currency woes to linger and weigh on its top line in 2016. Hence, it expects net sales for 2016 to decrease in low to mid-single digits range.
Earnings Momentum Solid
Though the company’s top-line is hindered by the aforementioned factors, its earnings surprise history reveals a completely opposite picture. Colgate has a strong tradition of either meeting or beating estimates. The company posted in-line earnings for third-quarter 2016, thus maintaining its trend of beating and meeting estimates in alternate quarters for the fifth straight time.
COLGATE PALMOLI Price, Consensus and EPS Surprise
COLGATE PALMOLI Price, Consensus and EPS Surprise | COLGATE PALMOLI Quote
Moreover, earnings improved 1% year over year despite the prevalence of strong currency headwinds, deconsolidation of Venezuelan operations and other tough economic conditions. The strong results were backed by better pricing, emerging market growth and cost-savings from the funding-the-growth and 2012 Restructuring Program.
Growth Initiatives Backing the Stock
This earnings momentum is primarily driven by the company’s focus on its funding-the-growth initiatives that is aiding in cost reduction, and improving the company’s gross and operating margins. The funding-the-growth and 2012 Restructuring initiatives are aimed at reducing structural costs, standardizing processes, opening new distribution centers, improving decision making, enhancing market share and consequently, contributing significantly to the improvement of gross and operating margins over the long term. Additionally, the company remains focused on continually improving profitability through the growth of its higher-margin businesses.
Furthermore, the company adheres to its innovation and marketing strategy to bolster sales. On this front, Colgate launches numerous oral care and personal care products every quarter, which are expected to benefit its sales in the following quarters. Some of the recent product launches include new variants of toothpaste, Colgate Optic White variants, toothbrushes, Colgate 360 Charcoal Gold and Colgate Slim Soft Sensitive Gum Care.
Additionally, Colgate has always followed a disciplined capital allocation strategy that focuses on making investments to develop business, while using the excess cash to enhance shareholder returns through dividend payouts and share buybacks, owing to its strong cash generation ability. This highlights its financial flexibility, which should definitely draw investors’ attention.
Bottom Line
Though Colgate currently carries a Zacks Rank #4 (Sell), we believe the company has it all to bounce back and outperform the market. Aptly, it has a Growth Style Score of “A”. We believe the company’s potential lies in its ability to successfully execute its funding-the-growth plan and at the same time, as it promises, striving to bring a smile on everyone’s face with its innovative oral products.
Stocks to Consider
Better-ranked stocks in the broader Consumer Staples sector include Dean Foods Company , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and B&G Foods, Inc. (BGS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Dean Foods, with a long-term earnings growth rate of 12%, has surged nearly 25.8% year to date.
Ollie's Bargain has gained a whopping 77.5% year to date. Moreover, it has a long-term earnings growth rate of 18.9%.
B&G Foods has jumped 26.8% year to date. The stock has a long-term earnings growth rate of 8%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>