Credit Suisse Hopes On Colgate-Palmolive’s Underlying Strength Despite FX Risk

• Credit Suisse analyst Kaumil Gajrawala reiterated an Outperform rating on the shares of Colgate-Palmolive Co (NYSE: CL) and lowered the price target to $85 from $88.

• The analyst said Colgate’s shares are down 15% year-to-date owing to risks from the rising dollar and fears of global recession.

• However, the analyst added, trends across Colgate’s categories continue to improve as the company realizes the benefits of investments, advertising is up 22% versus the pre-pandemic levels, while capex has nearly doubled.

• Gajrawala thinks consumers in emerging markets such as Brazil and Mexico are holding up better than feared.

• Colgate’s trends in the US tracked channels have improved sequentially, led by personal/home care.

• Effects of destocking as Amazon.Com, Inc. (NASDAQ: AMZN) and other e-tailers close warehouses, and tightness in pet food capacity may impact Q3 shipments, though the analyst views this as temporary.

• Gajrawala continues to forecast margins to improve sequentially as commodity inflation eases and savings from Colgate’s global productivity initiative kick in, albeit at a slower pace, given worse F/x trends.

• He added that Colgate is showing evidence that efforts to reposition the business are starting to pay off as oral care gains market share and Hill’s growth continues.

• Despite worse commodities and currencies, the analyst thinks the breadth of Colgate’s portfolio and under-indexing in certain categories are relative advantages.

• Price Action: CL shares are trading higher by 0.91% at $72.80 on the last check Tuesday.

• Photo Via Company

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