CL stock has seen a decline of 10% from levels of $85 in early January 2021 to around $75 now, vs. an increase of about 10% for the S&P 500 over this roughly three-year period. CL has had a poor run, with the stock losing value in each of the last three years. Returns for the stock were 0% in 2021, -8% in 2022, and -6% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 9% in 2023 – indicating that CL underperformed the S&P in 2021 and 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Staples sector, including WMT, PG, and COST, and even for the megacap stars GOOG, TSLA, and MSFT.
In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could CL face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, we believe CL stock has little room for growth. We estimate Colgate-Palmolive’s Valuation to be $81 per share, reflecting only a 10% upside from its current levels of $73. Our forecast is based on a 25x P/E multiple for CL and expected earnings of $3.21 on a per-share and adjusted basis for the full year 2023. This compares with the last three-year average P/E multiple of 26x. The company raised its earnings outlook to rise in high single-digits vs. its prior view of high end of mid-single-digit growth.
Colgate-Palmolive’s revenue of $4.9 billion in Q3 2023 was up 10% y-o-y, led by a 21% growth in Pet Nutrition and an 8% rise in Oral, Personal, and Home Care segment sales. Pet Nutrition sales growth was driven by a 12% rise in pricing and a 9% growth in volume. On the other hand, Oral, Personal, and Home Care segment sales saw its volume decline by 1%, but an 8.5% pricing gain resulted in segment sales growth of 8%. The company also saw its operating margin expand by 30 bps to 21%. Higher revenues and margin expansion resulted in adjusted earnings per share growth of 16% to $0.86 in Q3’23, compared to $0.74 in the prior-year quarter.
While CL stock looks like it has little room for growth, it is helpful to see how Colgate-Palmolive’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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