Analysts Maintain Cautious Optimism for Colgate-Palmolive Despite Market Underperformance

Colgate-Palmolive (CL), the $72.8 billion consumer staples behemoth behind household names in oral, personal, and home care, finds itself in a curious position. Despite a recent earnings beat and robust cash flows, its shares have failed to keep pace with the surging broader market, prompting a closer look from investors and analysts alike.

Over the past year, CL stock has dipped slightly, a stark contrast to the S&P 500's ($SPX) 14.3% rally. Year-to-date, the divergence is even more pronounced, with Colgate down 14.3% against the index's 1.4% gain. The stock has also lagged behind its sector peers, as tracked by the Consumer Staples Select Sector SPDR Fund (XLP).

The company's latest quarterly report, however, offered a glimmer of resilience. Fourth-quarter earnings released in January sparked a 5.9% single-day jump after Colgate posted net sales of $5.23 billion, a 5.8% year-over-year increase. Organic sales grew 2.2%, demonstrating underlying strength even after navigating the exit from a private-label pet food business. For the full fiscal year, net sales reached a record $20.38 billion.

"The market is punishing staples for not being tech, but it's missing the forest for the trees," said Michael Rourke, a portfolio manager at Horizon Wealth Advisors. "Colgate's global footprint and pricing power in essentials provide a defensive bedrock in volatile times. Their consistent dividend and buybacks are a signal of fundamental health that growth stocks often lack."

This view is echoed, albeit cautiously, on Wall Street. The analyst consensus currently stands at "Moderate Buy." Of the 21 analysts covering CL, 12 recommend some form of buy, while 8 suggest holding. Notably, JPMorgan recently raised its price target to $93, citing confidence in the company's market position.

Yet, not all observers are convinced. "A 'Moderate Buy' is analyst-speak for 'we have no conviction,'" countered Lisa Tran, a financial blogger known for her sharp commentary. "This stock is dead money. It's a glorified bond in a sector being squeezed by inflation and private-label competition. That 14% YTD drop isn't a blip; it's a verdict. Investors are right to look elsewhere for real growth."

Looking ahead, analysts project earnings per share to grow 4.6% to $3.86 for the coming fiscal year. The company has a history of exceeding earnings expectations, having beaten estimates for the past four consecutive quarters.

For long-term investor Sarah Chen, the appeal is in the stability. "I've held Colgate for years in my retirement account," she shared. "The share price bounces around, but the global brand recognition is immense. In emerging markets, as middle classes grow, the first thing they buy is name-brand toothpaste and soap. That's a long-term trend you can bank on, regardless of quarterly volatility."

While the stock currently trades slightly above the average analyst price target of $87.79, the highest Street target of $96 suggests a potential 6.3% upside from current levels, indicating that the bulls see room for a cautious recovery.

On the date of publication, the author held no positions in the securities mentioned. This article is for informational purposes only.