They mightn’t capture the headlines to the same extent as some tech companies, but shares of consumer staple
Colgate-Palmolive (NYSE: CL
) are just as worthy of attention as we head into 2021. You just need to look a little deeper.
They finished last year at all-time highs after a 45% run from March’s lows. Since then however, they’ve dropped considerably compared to the rest of the market and have given back upwards of 10%. However, there’s a strong argument to be made for viewing this as an entry opportunity and buying the dip.
On Friday the company, best known for their toothbrushes, toothpastes and soaps, reported Q4 earnings that came in ahead of analyst expectations on both the topline and bottom line numbers. Revenue was up almost 8% on the year as organic growth hit 8.5%, well ahead of the 5.4% consensus. Management reconfirmed their leading position in manual toothpastes with their global market share at 31%. They also saw fit to increase FY21 guidance on net sales more than 130% to 7%. It seems as if the pandemic ended up doing them little to no harm at all, which makes sense considering the likes of toothpaste and soap are probably the last in line of things to be cut when cash is tight.
CEO Noel Wallace unsurprisingly struck a bullish tone with the release, noting they were “very pleased to end 2020 with another quarter of strong, broad-based organic sales growth. Every division grew mid-single-digit or higher. He added, “our choices to invest in innovation, digital transformation and advertising are helping to deliver growth across our portfolio. While several of our categories continue to benefit from higher consumer demand due to the COVID-19 pandemic, we believe we have the right strategies in place to deliver profitable growth over the longer term.”
This sounds like a company that’s in control and is confident about where they’re going. For all that though, shares have barely peeped since. A small jump on Friday was quickly retraced and they’ve effectively been flat for the past week. Based on fresh sell-side comments however, this lacklustre performance mightn’t last much longer.
Longer Term Potential
On Monday of this week, Bank of America reiterated their Buy rating in light of Q4’s results and built out a strong business case for outperformance in 2021. In a note to clients, they highlighted expected growth in the oral care and skin care product lines, growing digital capabilities which will drive higher margins, and a favorable FX environment. They upped their FY21 estimates and gave shares a fresh price target of $92, implying upside of around 18% from Monday’s close.
Credit Suisse were also out with an upgrade to shares, albeit a move from Underperform to Neutral. Investors will be hoping that some of the other heavyweights follow them down this road soon, as only earlier this month both RBC and Stifel cut their rating on shares to Neutral.
But for all that, Colgate remains the epitome of a slow and steady company that looks great in any long term portfolio. They mightn’t knock your socks off with triple digit percentage moves, but they control large swaths of market share in products that are and will continue to be used by most of the world’s population on a daily basis. They’ve a strong balance sheet, a 2.2% dividend yield, and are beating anaylst’s expectations most every quarter. What’s not to like?
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