Shares of consumer goods giant Colgate-Palmolive (NYSE: CL) are down 5.7% year-to-date on concerns over inflationary pressures.
Colgate offers oral care, personal care, household cleaning products, and pet nutrition products in over 200 countries. Last month, the company raised its quarterly dividend by 4.4% to $0.47 and announced a $5 billion share repurchase program. Colgate’s dividend yield of 2.24% is higher than the Consumer Goods sector’s average of 1.51%
Colgate is scheduled to announce its first-quarter results on April 29. The company’s Q421 sales grew 1.8% to $4.4 billion but missed analysts’ expectations of $4.43 billion. Adjusted EPS grew 3% to $0.79 and was in line with the consensus estimate. So, what does the Street expect this time around?
Q1 Expectations
Analysts expect Colgate’s Q122 sales to rise 1.3% year-over-year to $4.4 billion. However, they forecast a 6.3% decline in adjusted EPS to $0.75.
On the Q421 conference call, Colgate’s management cautioned investors about higher raw material costs, with the biggest impact expected to be felt in the first quarter. The company expects raw material cost headwinds to moderate as the year passes.
Colgate also expects higher logistics costs to hurt its profitability this year. The company’s productivity initiatives and higher pricing are expected to mitigate the impact of cost inflation.
Overall, Colgate’s outlook, issued earlier this year, indicates adjusted EPS growth in the low- to mid-single-digits range in 2022. Further, the company expects 2022 organic sales growth within its 3%-5% long-term target range and net sales growth in the 1%-4% range, supported by continued momentum in the Oral Care and Pet Nutrition divisions.
Word on the Street
Recently, Stifel Nicolaus analyst Mark Astrachan reduced his 2022-2023 EPS estimates for Colgate to reflect the impact of increased input costs and currency headwinds. That said, the analyst sees “more upside than downside” for Colgate shares driven by multiple expansion as the top-line growth remains at the high-end of the company’s long-term organic growth target of 3%-5%.
In line with his views, Astrachan lowered his price target on Colgate to $88 from $90 and maintained a Hold rating.
On TipRanks, Colgate scores a Moderate Buy consensus rating based on five Buys, nine Holds, and one Sell. The average Colgate-Palmolive price target of $85.79 implies 6.54% upside potential from current levels.
Conclusion
Any unfavorable revisions by Colgate to its full-year outlook could further pull down its shares. Analysts and investors will be keen to hear management’s commentary on the impact of inflation and supply chain pressures on the company’s upcoming quarters.
On the other hand, Colgate scores a “Perfect 10” on TipRanks’ Smart Score system, indicating that it is likely to outperform market expectations. That could strike a positive note for investors.
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