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Will High Demand & Online Strength Continue to Aid Colgate (CL)?

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Colgate-Palmolive Company (CL - Free Report) appears to be in a good shape amid the otherwise jeopardized economy, which is impacted by the coronavirus outbreak. The company’s shares have rallied 23.1% in a year’s time, outperforming the industry’s growth of 14.9%. Markedly, this global leader of consumer products has been benefiting from rising demand for essentials amid the pandemic.

Apart from this, the company’s increased focus on online services along with brand enhancement endeavors through innovation and expansion in newer markets has been bolstering growth. Let’s delve deeper into the factors aiding this Zacks Rank #3 (Hold) stock.

Factors Narrating Colgate’s Growth Story

Colgate has been benefiting from continued demand for personal and home care products as well as the finest innovation across product categories. Notably, the company reported impressive third-quarter 2020 results with double-digit growth in operating profit, net income and earnings per share. Also, it marked the eighth consecutive quarter of sequential improvement in organic sales with growth across all of its regions.

Further, the company is witnessing positive trends in the e-commerce platform, led by growth in the Hill’s business. Encouragingly, it remains on track to expand the availability of its products through the e-commerce channel. In sync with this, the launch of Hill’s to Home program enables pet parents to purchase prescription diet products directly from their veterinarian with home delivery options. Also, its professional skincare businesses — Elta MD and PCA Skin — for spas and dermatology is performing well. As a result, the company expanded its premium skincare portfolio with the buyout of the Filorga skincare business.

The company is also focused on its innovation strategy to attain growth in adjacent categories and product segments. It is on track with the premiumization of its Oral Care portfolio through major innovation. Some notable innovation efforts include hum by Colgate, Colgate Optic White Renewal toothpaste and the Colgate Optic White Overnight Teeth Whitening Pen as well as the continued expansion of the Naturals and Therapeutics divisions. Apart from these, management’s recent buyout of Hello Products LLC (a leading oral care brand in the United States that produces eco-friendly and organic products), in a bid to expand its already strong oral care portfolio, is performing well. These endeavors are likely to aid the top line in the near term. 

Hurdles on the Way

However, things are not all rosy for Colgate. The company has been witnessing elevated SG&A expenses due to higher advertising investment and logistics costs related to the increased demand stemming from the pandemic. Topping it, unfavorable foreign currency movements weighed on its third-quarter sales.

Wrapping Up

The abovementioned upsides, especially strong demand, are likely to help Colgate counter the cost-related headwinds.

Moreover, a VGM Score of B and a long-term earnings growth rate of 6.1% raise optimism in the stock. Also, the Zacks Consensus Estimate for 2021 earnings is pegged at $3.05 per share, rising 1% in the past 60 days.

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