Colgate-Palmolive (CL) Last Update 5/15/21
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% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Colgate-Palmolive
STOCK PRICE
DIVISION
% of STOCK PRICE
Net Debt
11.5% $11.20
TOTAL
100%
$97.54
$86.33
Yours
Trefis Price
N/A
$76.17
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Colgate-Palmolive Company

VALUATION HIGHLIGHTS

  1. Oral, Home, Personal Care constitutes 79% of the Trefis price estimate for Colgate-Palmolive's stock.
  2. Hill's Pet Nutrition constitutes 21% of the Trefis price estimate for Colgate-Palmolive's stock.

WHAT HAS CHANGED?

  1. Q1 2021 Earnings

Colgate-Palmolive reported net sales of $4.34 billion in Q1 2021, up from $4.1 billion in Q1 2020. Operating margins came in at roughly the same level as Q1 2020. However, a higher effective tax rate saw net income fall from $715 million to $681 million over this period, which saw EPS fall from $0.83 to $0.80.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Colgate-Palmolive's Oral, Personal & Home Care EBITDA Margin : Oral Care's EBITDA Margin has historically fluctuated between 25% and 30%. It decreased from 28.8% in 2011 to 24.0% in 2015 due to a combination of several factors, including commodity cost inflation, higher advertising expenses, and currency headwinds. However, it surged significantly to over 30% in 2016, mainly because of cost savings initiatives, favorable commodity costs and some gains from the sale of lands. Thereafter, it declined slightly to 31% in 2017 and 30.4% in 2018. As of 2020, it currently stands at 30%.

We expect that Colgate-Palmolive's cost-saving measures will help it to keep its margins near 30% over our forecast period. However, there could be an approximate 10% upside to the Trefis price estimate if margins expand to 38% over the Trefis forecast period, due to stabilization of input costs and currency headwinds, and lower marketing costs due to a shift to digital and social media advertising.

Colgate-Palmolive's Global Market Share in Oral Care: We estimate Colgate-Palmolive's Global Market Share of Oral Care to have increased from 22% in 2009 to 25% in 2013, as Colgate's revenues from Oral Care increased faster than the global market size of oral care products. However, it fell back to just over 20% by 2020 on increasing competition. Going forward, we expect Colgate's oral care market share to fall in the medium term but increase thereafter to about 22% by the end of the Trefis forecast period. If Colgate-Palmolive's Global Market Share of Oral Care expands to 30% by the end of our forecast period, there could be an upside of about 15% to our price estimate.

BUSINESS SUMMARY

Colgate-Palmolive is a global multinational corporation with operations in over 200 countries focusing on manufacturing, marketing and distribution of Oral Care (toothpaste, toothbrush, mouthwash, dental floss etc), Personal Care (soaps and shampoos), Home Care (detergents and cleaners) and Pet Nutrition products. With over 75% of net sales coming from outside the U.S., Colgate-Palmolive has a very geographically diversified business.

Colgate-Palmolive is a global leader in Oral Care (which constituted over 45% of the company's net sales in 2018) with a leading market share in toothpaste and manual toothbrush brands in most parts of the world. Colgate’s Oral Care products include Colgate Total, Colgate Max Fresh toothpastes, Colgate 360° manual toothbrushes, Colgate Plax mouth rinses, dental floss and pharmaceutical products for dentists and oral health professionals.

Colgate-Palmolive manufactures and markets a wide array of products for Home Care (21% of net sales in 2016), including Palmolive and Ajax dish washing liquids, Fabuloso and Ajax household cleaners and Murphy’s Oil Soap. Colgate is a market leader in fabric conditioners with leading brands including Suavitel in Latin America and Soupline in Europe.

Colgate-Palmolive is also a global leader in liquid hand soap. Colgate-Palmolive’s Personal Care (19% of net sales in 2018) products include Palmolive and Softsoap brand shower gels, Palmolive, Irish Spring and Protex bar soaps, and Speed Stick/Lady Speed Stick deodorants. Colgate-Palmolive’s Personal Care business outside of the U.S. also includes Palmolive and Caprice shampoo and conditioners.

Colgate-Palmolive, through its Hill’s Pet Nutrition segment (15% of net sales in 2018), is a global leader in specialty pet nutrition products for dogs and cats. Hill’s markets pet foods primarily under two trademarks: 1) Science Diet, which is sold by authorized pet supply retailers and veterinarians for everyday nutritional needs and 2) Prescription Diet, a range of therapeutic products sold by veterinarians to help nutritionally manage disease conditions in dogs and cats.

SOURCES OF VALUE

Trefis believes that Colgate-Palmolive's Oral Care business is its most valuable component because of the following reasons:

Oral Care market share is five times higher but market is over two times smaller than the shampoos market

Colgate-Palmolive has about 20% share in the $34 billion global oral care market. The primary reason for Colgate's strong market position is its presence in multiple geographies especially in emerging markets like Latin America and Asia. In some regional markets, Colgate has a monopoly in oral health. Higher market share coupled with substantial brand equity and brand loyalty accrued over several years helps Colgate reach a larger number of consumers and shields its market position from larger competing brands (such as Procter & Gamble's Oral-B) and low cost private labels.

On the other hand, Colgate-Palmolive has just under 4% share in the combined $88 billion global market for deodorants, bath and shower products, and hair care products.

KEY TRENDS

Colgate's marketing initiatives

Colgate has undertaken several initiatives that have increased the popularity of its brands among consumers and oral health care professionals. These initiatives have helped its products outsell other oral care brands available in the market.

  • "Shopper Marketing" involves analyzing consumer behavior in stores to convert shoppers into buyers. Colgate has leveraged its partnerships with neighborhood stores and supermarkets to offer trial packs as well as helping create awareness among consumers regarding the benefits of oral health care through messages on prescription bags and better in-store displays.
  • Colgate partners with dental care professionals to provide oral health education, free samples and dental screenings to children and their families to promote the use of oral care products. Initiatives such as inviting dental care professionals to tour Colgate's Global Technology Center have helped build credibility for its toothpaste brands.

  • Product innovation to drive higher margins and increase sales of premium priced brands


    Colgate-Palmolive launches new innovative products in every quarter to retain and build consumer interest. It has recently shifted its focus to so-called "margin-accretive" innovation, that is, products with specific additional benefits that justify higher pricing. has launched several new products in the past and continues to improve its existing product line. These innovations not only help Colgate-Palmolive drive top-line growth and defend its market share, but also adds to the bottom-line due to their higher pricing.

    Strong partnership with customers and suppliers


    Colgate-Palmolive's constant growth strategy has been to pursue partnerships and work closely with customers, many of whom are small shop owners, store owners and other retailers. This is done in order to understand consumer behavior and preferences. Colgate-Palmolive uses this information as feedback for its active R&D and marketing efforts, thus providing greater value to consumers in the form of better products.
    Colgate-Palmolive has relationships with dental and veterinary professionals to build credibility among consumers, gain endorsement and long-term brand loyalty for its larger Oral Care and high growth Pet Nutrition businesses.