Colgate Hits 52-Week High: Can We Expect More Momentum?

Colgate-Palmolive Company (NYSE:CL) , one of the leading companies in oral and personal care products, hit a 52-week high of $77.26 yesterday and closed at $77.23. This was backed by improved earnings and margins reported in the first-quarter fiscal 2017 results coupled with cost saving and strategic growth initiatives. Colgate’s shares climbed 7.5% in the past one month, outperforming the Zacks categorized Consumer Staples sector's growth of 3.6%. The company exhibits a VGM Score of “B” and has a long-term earnings growth rate of 9.2%, making us confident of its innate strength.

Colgate delivered a positive earnings surprise in the first-quarter 2017. The bottom line grew year over year, aided by margin expansion and lower tax rate. The company has been witnessing enhanced margins for a while now, driven by the cost-savings from funding-the-growth and 2012 Restructuring Program. These initiatives contributed to the expansion of adjusted gross margin by about 70 basis points (bps) and adjusted operating margin by about 20 bps in the first quarter.

The soft sales trend remains a concern for the company. Sales have lagged estimates in the first quarter and negatively impacted by currency headwinds and drop in unit volumes. The company's sales lagged estimates for four straight quarters now, while also missing estimates in 15 of the last 16 quarters. Going into 2017, Colgate anticipates the backdrop to remain challenging. Hence, the company continues anticipating 2017 net sales and dollar-basis earnings per share to grow in low-single digits range.

Despite such factors, shares of this Zacks Rank #3 (Hold) stock has increased over 7% since first quarter earnings release. If market hearsays are to be believed, this stock surge is expected to be driven by speculations of a buyout, though the company has not released any official statement regarding the same.

Further, we remain hopeful regarding Colgate’s innovation and in-store implementation that has guided its growth over the past many years, enabling it to capture markets and become a globally recognized brand across many developed and emerging nations.

Stocks that Warrant a Look

Some better-ranked stocks in the same sector include Constellation Brands, Inc. (NYSE:STZ) , MGP Ingredients, Inc. (NASDAQ:MGPI) and Energizer Holdings, Inc. (NYSE:ENR) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Constellation Brands has an average positive earnings surprise of 7.7% over the trailing four quarters and has a long-term earnings growth rate of 17.8%.

MGP Ingredients has an average positive earnings surprise of 27% over the trailing four quarters and has a long-term earnings growth rate of 15%.

Energizer Holdings has an average positive earnings surprise of 21.6% over the trailing four quarters and has a long-term earnings growth rate of 9.8%.

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