Key Takeaways Colgate-Palmolive is poised to recover in 2026 after its sales growth slowed and stock fell in 2025, Morgan Stanley analysts wrote.The analysts named the company their top pick in the Household & Personal Care segment, and said they expect sales to grow faster than competitors this year. Morgan Stanley analysts named a consumer products giant known for its toothpaste one of their top picks for the year. Colgate-Palmolive (CL) is now the analysts' top pick in the Household & Personal Care ...

Core Insights - The Chinese fast-moving consumer goods (FMCG) market showed signs of stabilization in 2025, with total sales growing by 1.3% year-to-date Q3, driven by a 3.8% increase in volume, while average selling prices (ASP) declined by 2.4% [15][19][51] - Lower-tier cities (Tiers 3-5) accounted for approximately 80% of market expansion, benefiting from urbanization, brand penetration, and lower living costs, while Tier 1-2 cities remained flat due to slower macro recovery and consumption downgrading [16][27] - Emerging channels such as membership stores, snack collection stores, and discount stores experienced rapid growth, with year-over-year increases of 40%, 51%, and 92% respectively, while online channels grew by 7% [17][19] Market Performance - The FMCG market recorded a modest growth of 1.3% in the first three quarters of 2025, with volume growth of 3.8% and a decline in ASP of 2.4% [15][19] - Packaged food (+3.4%) and home care (+3.3%) led the growth, while personal care saw a slight recovery (+1.1%) and beverages faced a downturn (-1.1%) [31][34] - Price deflation moderated from 3.4% in 2024 to 2.4% in 2025, indicating a shift in consumer behavior towards balancing price and quality [51][52] Category Dynamics - Packaged food maintained growth driven by stable demand in core staples and snacking categories, while beverages struggled due to price competition and substitution by freshly made drinks [31][34] - Personal care showed early signs of recovery, particularly in makeup, which rebounded strongly, while toothpaste was the only category to see both volume and ASP growth [42][43] - The beverage category faced challenges, with milk and yogurt experiencing significant declines in both volume and ASP, while juice and beer showed positive growth [34][40] Channel Evolution - Traditional offline channels faced pressure, but new demand generation channels expanded rapidly, with O2O channels rebounding strongly [17][19] - Online channels saw a slight increase in penetration to 39%, with Douyin and Pinduoduo contributing over 40% of total FMCG e-commerce sales [17][19] - The rise of private labels was notable, with an average annual growth of 44% over two years, now accounting for 2% of FMCG sales [17] Pricing Trends - The deflationary trend persisted, with 19 out of 27 FMCG subcategories experiencing price declines, although some categories like juice and chocolate showed signs of premiumization [51][52][53] - Consumers are increasingly making thoughtful decisions between price and quality, leading to more disciplined promotional strategies from brands [51][52]

Core Insights - Exchange-traded funds (ETFs) provide a means for investors to diversify portfolios and manage risks during economic downturns [1][2] - Consumer staples are identified as a resilient sector during recessions, historically outperforming other sectors [4][5] Investment Strategy - Long-term investors should prepare for volatility and consider exposure to defensive sectors, which can provide reliable passive income during recessions [3] - Allocating a portion of capital to defensive ETFs like the Consumer Staples Select Sector SPDR Fund (XLP) is recommended, especially as investors approach retirement [10][11] Sector Performance - Consumer staples have shown strong performance historically, with an average return of 14% in the 12 months preceding recessions and 10% in the 12 months following [6][5] - The sector has consistently outperformed others during recession periods since 1990, including notable economic downturns [5] ETF Details - The Consumer Staples Select Sector SPDR Fund (XLP) has a yield of 2.71% and a diversified investment across various consumer staples categories [7][8] - Top holdings in the fund include Walmart (11.05%), Costco Wholesale (9.33%), Procter & Gamble (8.18%), Coca-Cola (6.62%), and Philip Morris International (5.77%) [12]

Core Insights - Colgate-Palmolive Company is recognized as one of the 15 Best Boring Dividend Stocks to Buy [1] - Barclays has reduced its price target for Colgate-Palmolive to $80 from $82 while maintaining an Equal Weight rating, highlighting the company's efforts to drive category growth and market share [2] - In Q3 2025, Colgate-Palmolive reported revenue of $5.13 billion, reflecting a 2% increase year-over-year, maintaining a leading position in toothpaste with a 41.2% global market share and 32.4% in manual toothbrushes [2] - The company generated $2.7 billion in operating cash flow during the first nine months of fiscal 2025, with a shift in management focus towards the 2030 Strategy to enhance organizational agility [3] - Colgate-Palmolive's product portfolio includes oral care, personal care, home care, and pet nutrition [4]

Core Insights - Colgate-Palmolive Company is often underestimated when viewed solely through its basic product offerings like toothpaste and body wash, but a deeper analysis reveals significant business dynamics [1] Valuation Methodology - Various methods exist for determining a company's fair value, with the DCF method being complex and prone to biases, while the multiples approach relies on the assumption that peer companies are fairly priced, which is often not the case [1] - Reverse valuation starts from the market price and discount rate, working backward to uncover the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1] - The Free Cash Flow to Equity (FCFE) model is utilized to determine what belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE, ignoring working capital and debt changes for clarity [1] - Forecasts employ the H-model, which features a 10-year two-stage growth fade, with terminal growth aligned to the risk-free rate, specifically the 10-year government bond yield [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear and noise-free valuation of the business [1]

Core Insights - Colgate-Palmolive Company is often underestimated when viewed solely through its basic product offerings like toothpaste and body wash, but a deeper analysis reveals more about its business dynamics [1] Valuation Methods - Various methods exist for sell-side analysts to determine a company's fair value, including DCF, multiples approach, and reverse valuation, each with its own strengths and weaknesses [1] - The DCF method requires precise assumptions, which can lead to biases, while the multiples approach relies on the assumption that peer companies are fairly priced, a notion that is often not supported by historical data [1] - Reverse valuation starts from the market price and discount rate, working backward to uncover the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1] Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to determine what truly belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE, ignoring working capital and debt changes [1] - The analysis focuses on three key figures: earnings, amortization, and investments, which are essential for understanding the core business performance [1] Forecasting Approach - The H-model is applied for forecasts, which involves a 10-year two-stage growth fade, with terminal growth aligned to the risk-free rate, specifically the yield of 10-year government bonds [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear and noise-free valuation of the business [1]

Core Insights - Colgate-Palmolive Company reported third-quarter adjusted earnings per share of 91 cents, exceeding the analyst consensus estimate of 89 cents, with quarterly sales of $5.131 billion, reflecting a 2% increase in net sales [1][3] Group 1: Financial Performance - The company’s third-quarter adjusted earnings per share were 91 cents, beating the consensus estimate of 89 cents [1] - Quarterly sales reached $5.131 billion, aligning with market expectations, and net sales increased by 2% [1] - For 2025, Colgate anticipates net sales growth in the low single digits, impacted slightly by foreign exchange fluctuations [3] Group 2: Strategic Outlook - Colgate is transitioning to a new 2030 strategy and implementing a Strategic Growth and Productivity Program to enhance growth despite global market uncertainties [2] - Organic sales growth is projected at 1%–2%, which includes a ~70 basis points impact from exiting private-label pet sales [3] Group 3: Analyst Ratings and Price Targets - Following the earnings announcement, various analysts adjusted their price targets for Colgate-Palmolive, with Wells Fargo lowering its target from $80 to $77 and Evercore ISI Group from $100 to $94 [4][6] - JP Morgan and Morgan Stanley both maintained an Overweight rating while lowering their price targets to $87 from $88 and $96 respectively [6] - Citigroup maintained a Buy rating but reduced its price target from $105 to $95 [6]

Core Insights - Colgate-Palmolive Company reported third-quarter adjusted earnings per share of 91 cents, surpassing the analyst consensus estimate of 89 cents, with quarterly sales of $5.131 billion, reflecting a 2% increase in net sales [1][3] Financial Performance - The company’s third-quarter adjusted earnings per share were 91 cents, beating the consensus estimate of 89 cents [1] - Quarterly sales reached $5.131 billion, aligning with market expectations, and net sales increased by 2% [1] - For 2025, Colgate anticipates net sales growth in the low single digits, impacted slightly by foreign exchange [3] Strategic Outlook - Colgate is transitioning to a new 2030 strategy and implementing a Strategic Growth and Productivity Program, aiming to reaccelerate growth amid global market uncertainties [2] - Organic sales growth is projected at 1%–2%, with approximately 70 basis points impact from exiting private-label pet sales [3] Analyst Ratings and Price Targets - Wells Fargo maintained an Underweight rating, lowering the price target from $80 to $77 [6] - Evercore ISI Group maintained an Outperform rating, reducing the price target from $100 to $94 [6] - JP Morgan and Morgan Stanley both maintained Overweight ratings, with price targets adjusted from $88 to $87 and from $96 to $87, respectively [6] - Citigroup maintained a Buy rating, significantly lowering the price target from $105 to $95 [6]

Core Insights - Colgate-Palmolive Co. reported third-quarter earnings that exceeded estimates but lowered its full-year sales outlook due to slowing category growth [1] - Adjusted earnings per share were $0.91, surpassing the consensus forecast of $0.89, while revenue reached $5.13 billion, reflecting a 2% increase year-over-year [1] - The company experienced modest organic sales growth of 0.4%, impacted negatively by a 0.8% decline from exiting private label pet sales [1] Financial Performance - The company maintained a strong position in oral care, holding a 41.2% global market share in toothpaste and 32.4% in manual toothbrushes [2] - The organic sales growth forecast for 2025 was revised down to 1%-2% from the previous 2%-4% due to softer market conditions [2] - Gross profit margin on a base business basis decreased by 190 basis points to 59.4%, and operating profit fell by 2% to $1.06 billion [2] Regional Performance - Regional performance varied, with Europe showing the strongest growth at a 7.6% sales increase, while Asia Pacific experienced a decline of 1.5% [3] - Hill's Pet Nutrition, accounting for approximately 22% of company sales, reported a 1.4% increase in net sales, although organic sales decreased by 1.3% [3] - Colgate-Palmolive reaffirmed its full-year guidance for low-single-digit EPS growth and expects the full-year gross margin to remain around the year-to-date level of 60.1% [3]

Core Viewpoint - Colgate-Palmolive has reduced its annual sales forecast, indicating that rising economic uncertainty is affecting consumer spending on higher-priced essential items [1] Company Summary - Colgate-Palmolive is facing challenges in maintaining sales due to economic conditions that are leading consumers to be more cautious with their spending [1] - The company’s adjustment in sales forecast reflects a broader trend in the market where consumers are prioritizing lower-cost alternatives [1] Industry Summary - The consumer goods industry, particularly in essential products, is experiencing a shift as economic uncertainty influences purchasing behavior [1] - There is a growing trend of consumers opting for more affordable options, which may impact sales for companies offering premium products [1]