Morningstar

No Sign of Decay in Competitive Edge at Colgate

Fourth-quarter performance at the wide-moat firm wasn't as dire as the share response would suggest.

Securities In This Article
Colgate-Palmolive Co
(CL)

Despite the mid-single-digit erosion in the share price following

In response to sluggish category prospects, though, management trimmed its long-term sales target to 3%-5% growth annually, versus its previous 4%-7% outlook. As such, we will likely reduce our long-term sales outlook, which currently calls for 5% top-line growth each year, a touch. We do posit that additional cash generated since our last update--as well as a slightly lower tax rate than we modeled to reflect recently enacted corporate tax reform in the U.S.--are likely to offset the impact, leaving our $77 fair value estimate largely unchanged. Overall, we continue to believe Colgate is focused on growing the business for the long term, and that the combination of its leading brands and entrenched relationships with retailers and professionals (dentists, veterinarians, and dermatologists) should ensure it boasts economic profits for the next 20 years. At a slightly larger discount, long-term investors would be wise to stock up on this wide-moat name.

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About the Author

Erin Lash, CFA

Sector Director
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Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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