Colgate-Palmolive Company CL
displayed significant growth over the years on the back of robust
quarterly performances, which testify its smooth progress on the
growth strategies. The companyâs accelerated investments in brands,
higher pricing and strong innovation along with expansion in new
markets and channels are key drivers. Further, it is on track with
its savings program.
Clearly, the stock of this consumer goods company has jumped 19.7%
year to date, outperforming the industryâs growth of 12.5%.
Moreover, this Zacks Rank #2 (Buy) stock has gained about 3.7%
since reporting stellar first-quarter 2019 results on Apr 26.
Notably, the companyâs first quarter marked the second straight
quarter of sales beat and the third positive earnings surprise in
the last five quarters.
Factors Narrating Colgateâs Growth Potential
Innovation and expansion in new markets have been cornerstones of
Colgateâs success over the years. The companyâs innovation strategy
is focused on growing in adjacent categories and product segments.
In 2019, its innovation efforts will be marked by the re-launch of
Colgate Total and Hillâs Science Diet as well as the continued
expansion of the naturals range. This along with accelerated
investments in brands and higher pricing is likely to aid the top
line in 2019. Notably, the initial response to the re-launch of
Hillâs Science Diet has been positive, with improved market share
in the first quarter. The company expects to continue the re-launch
across the globe through the first half of 2020.
Further, Colgate continues to expand Naturals toothpastes, based on
local insights, with the launch of the charcoal range across many
countries. In Latin America, the companyâs Oral Care innovations
bore fruit, with market share gains in Colgate Natural Extracts
toothpaste line, Colgate Guard franchise in pharmacies in Brazil
and the Colgate Slim Soft Advanced toothbrush. The Colgate
Vedshakti line is witnessing market share gains in India.
Additionally, the Naturals range is a key area of focus for the
company in personal and home care categories.
Moreover, the company is keen on expanding the availability of
products across markets by enhanced distribution to newer markets
and channels. This has been driving robust organic sales growth for
the past several quarters. Notably, organic sales improved 3% in
the first quarter. Robust volume and favorable pricing aided
organic sales growth in the quarter.
The company is aggressively expanding into faster growth channels
while extending the geographic footprint of its brands. In 2019, it
plans to expand the portfolio by introducing pharmacy brands like
Elmex and Meridol to newer markets. It is also likely to increase
investments in professional skin care businesses â Elta MD and PCA
Skin â in spas and dermatologists.
Additionally, it is expanding e-commerce offerings, with the launch
of Hillâs to home, which significantly exceeded subscription
targets in the first quarter. This platform will enable pet parents
to purchase prescription diet products directly from their
veterinarian, with home delivery option. This should enable it to
deliver strong e-commerce growth in 2019. All these actions are
likely to drive solid top-line growth in 2019.
Additionally, Colgateâs savings program â Global Growth and
Efficiency Program or 2012 Restructuring Program and the Funding
the Growth undertakings â are delivering impressive results. The
company expects after-tax savings from the Global Growth and
Efficiency Program of $500-$575 million. The projected savings
target a three to four-year average cash payback, with an after-tax
rate of return above 30%.
By funding the growth initiative, the company aims at opening
environmentally sustainable distribution centers to offer better
service to its customers while also reducing fuel and
transportation costs. These programs are expected to contribute
significantly toward the improvement of gross and operating margins
over the long term.
Wrapping Up
Clearly, this New York City-based company has significant momentum
left, driven by growth efforts and strong position in the market.
This view is further supported by its impressive long-term earnings
growth rate of 5.4%.
Other Top-Ranked Stocks in the Consumer Staples
Space
Unilever Plc UL has an expected long-term earnings growth rate of
6.4%. Moreover, it currently has a Zacks Rank #2. You can see
the complete list of todayâs Zacks #1 Rank (Strong Buy)
stocks here.
PepsiCo Inc. PEP, also a Zacks Rank #2 stock, has an expected long
term earnings growth rate of 7%.
General Mills, Inc. GIS carries a Zacks Rank #2 at present and has
expected long-term earnings growth rate of 7%.
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