Colgate-Palmolive's Pricing Plays Key Role In Delivery On Sales & Margins, Says Analyst

Raymond James analyst Olivia Tong reiterated a Market Perform rating on the shares of Colgate-Palmolive Company CL.
FX and commodity inflation pressures have been alleviating but are still substantial, so in the analyst’s view, pricing will continue to play a key role in CL’s delivery on sales and margins.
The analyst said elasticities would also be a key focus area, particularly in the U.S., Europe and Latin America.
During 3Q, pricing contributed 11.5 points to y/y organic sales growth while volume fell 4.5 points. The analyst believes 4Q will look similar as the analyst expects elasticities to remain better than historical norms.
Hills had an uncharacteristically challenging 3Q due to supply chain constraints and inventory management by retail, but the analyst expects 4Q to see a rebound, helped by the Red Collar acquisition, which is expected to contribute 2 points to Hill’s sales.
4Q ad margin is expected to be up y/y, in part due to spending that did not occur in 3Q due to the Hill’s capacity constraints, which is expected to shift into 4Q, said the analyst.
Looking to 2023, top considerations in the analyst’s view include the impact of softening consumer sentiment on CL’s ability for further premiumization, with average price in oral care still at a 90% price index to the market but recent toothpaste innovations like Optic White retailing for $10.
The analyst said that visibility into pricing, particularly in 2H23, and global category growth expectations would also be important factors.
Price Action: CL shares are trading lower by 0.03% at $75.46 on the last check Monday.

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