Colgate Takes Aim At $78 Mark

Shares of Colgate-Palmolive NYSE: CL continued their strong end to 2019 and start to 2020 last week with an impressive rally all the way through Friday’s close. By mid-morning on Monday, they were even higher and trading upwards of a full 17% higher from November’s low. Back then, the stock was bottoming out after a 15% pullback that culminated in a weak Q3 earnings report. A miss on revenue and a tightening margin did the damage that day, so perhaps it was fitting that a strong beat in organic sales in the company’s Q4 report on Friday sent shares back towards all-time highs. They also beat analyst expectations for EPS and revenue with the latter showing close to 6% growth year on year.

Colgate’s CEO, Noel Wallace, commented on the Q4 results, “we are very pleased to have ended 2019 with another quarter of sequential improvement in net sales growth and organic sales growth. It is especially encouraging that the strong 5.0% organic sales growth was broad-based, with every operating division contributing to the growth. We remain sharply focused on sustaining this growth momentum by continuing to innovate in our core businesses, pursue adjacent categories and expand into new markets and channels. We also continue to invest behind our brands, with our advertising investment increasing this quarter in absolute dollars and as a percent to sales versus the fourth quarter of 2018.”

Well Positioned For Any Slowdown

This kind of growth and optimism will come as a relief to investors who were likely rattled by the sales warning Unilever NYSE: UL issued in December. The stocks of the two consumer products giants have gone toe to toe across much of the last decade but interestingly both are lagging well behind the S&P 500’s return in the same timeframe. Many on Wall Street will point out that consumer products companies do tend to underperform the broader market in periods of strong global growth and are more associated with defensive cycles.

Colgate looks eager to continue growing its portfolio in order to be best positioned for any move towards defensive stocks and only last week announced its acquisition of Hello Products for an undisclosed amount. Hello Products are considered to be one of the fastest-growing, premium oral care companies in the country. This kind of momentum is also helping to drive shares on as they come within striking distance of the $78 mark.

Looking Ahead

They came within $0.09 of hitting this in January 2018 but pulled back hard and gave investors a choppy two years in the meantime. With RSI still only at 65 and the MACD in a bullish crossover since the start of this month, technically there’s every reason the stock will get up there in the coming weeks. Upgrades this morning from the likes of RBC Capital are lending their weight to the drive for $78 too.

As fears of a coming global slowdown increase, investors could do worse that add a $65 billion company that’s trading close to all-time highs into their portfolio, not to mention the solid 2.3% dividend yield Colgate offers to boot.