On Friday, Goldman Sachs (NYSE:GS) initiated coverage on Colgate-Palmolive Company (NYSE:CL) with a Buy rating and established a price target of $93.00. The firm highlighted Colgate's successful reinvestment strategy, which has led to increased market share in various sectors globally.
The company's focus on advertising and innovation has contributed to its turnaround, with notable gains in the global toothpaste market for two consecutive years, as well as in pet food and personal care segments in Latin America and Europe.
Colgate-Palmolive's exposure to emerging markets, which accounted for 43% of its FY23 sales, is expected to drive top-line growth momentum. Analysts project an end-market compound annual growth rate (CAGR) of 3.7% through 2030. The company is also anticipated to benefit from inflation-led pricing in the pet food sector in the near term.
The firm forecasts that Colgate's pet food margin expansion will lead to an 11.8% earnings before interest and taxes (EBIT) CAGR for the segment from FY23 to FY26. This growth is expected to underpin a high-single-digit earnings per share (EPS) growth for the company overall.
Goldman Sachs also notes that Colgate-Palmolive's current valuation is attractive, considering its strong fundamental outlook. The firm believes that this, coupled with the company's performance, should support a further re-rating from current levels, suggesting potential for stock price appreciation.
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