Earnings And Outlook Shake Support For Colgate-Palmolive
Colgate-Palmolive’s (NYSE: CL) Q4 results were a mixed bag for the market and one that shook support for the stock. The takeaway is that support is still present and will likely drive this high-quality dividend-growth stock higher over the course of the next year. One of the underpinnings of that support lies with the institutions and their ownership of the stock, ownership that has risen 4% over the course of the last year and is still rising today. At last reporting, Insidertrades.com showed the institutional activity was $2.85 billion in favor of the bulls and helping to keep price action above the $76 level. There has been some insider activity as well but total ownership is under 0.25% and inconsequential to price action.
Colgate-Palmolive Fall On Mixed Results
Colgate-Palmolive had a good quarter but there are many cautions to go along with that statement. While the revenue of $4.4 billion is up 1.9% versus last year it fell short of the analyst's consensus and is driven by higher prices and not volume growth. Volume is flat on a YOY basis which is good but pricing is worth 300 basis points of the revenue and was not enough to offset inflationary and product-mix pressures on the margin. On an organic basis, the company reported 3.0% in growth which is the low-end of the long-term range, and missed the consensus by 130 basis points.
Moving down to the earnings, the company reported a 300 basis point decline in the gross margin that, surprisingly, was slightly less than forecast and drove a semblance of strength on the bottom line. The adjusted $0.79 is up $0.02 or 2.5% from last year and is in line with the analyst's estimates despite the revenue weakness. The good news is that revenue growth is forecast to be up 1% to 4% in 2022 with organic growth within the 3% to 5% target range. The bad news is that increased spending will cut into margin despite an expectation for growth and results in low to mid-single-digit earnings growth compared to the consensus for slightly better results.
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"There is still much uncertainty stemming from the COVID-19 pandemic, supply chain disruptions, increases in raw material and logistics costs and volatility in consumer demand and currencies. With costs expected to remain elevated in 2022, our funding the growth and revenue growth management initiatives, including higher pricing, will be more important than ever,” said the company CEO in the press release.
Highly-Valued Colgate-Palmolive Pays A Safe Dividend
Colgate-Palmolive shares are highly-valued at nearly 25X this year’s earnings consensus and rightly so. The company has a rock-solid balance sheet, an outlook for growth, and is a high-quality dividend growth stock as well. The valuation may keep the stock range-bound in the short to mid-term but the dividend, growth, and dividend growth will drive the stock to new highs in the long-term. The payout is running near 2.2%, double the broad-market average, and an increase is expected with the next declaration.
The Technical Outlook: Range-Bound Colgate-Palmolive Confirms Support
Shares of Colgate-Palmolive fell in the wake of its earnings report but support quickly stepped in to confirm support at a higher level than we’ve seen in the past. Support now appears to be at the mid-point of the 12-month range near $80 and the 150-day moving average. Assuming this level holds as support, we see this tightly held stock ranging in a new, tighter range between $80 and $85 with the bias toward a test of resistance and possibly break to new highs.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Colgate-Palmolive (CL) | $94.13 | -0.4% | 2.12% | 29.79 | Moderate Buy | $92.35 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
