Colgate-Palmolive (NYSE:CL) is down 1.86% after Morgan Stanley warns that the company faces long-term revenue pressures.
In particular, the firm thinks the consumer trend of moving away from larger brands will hit Colgate-Palmolive's top line.
Deutsche Bank was also out with comments today on the consumer products seller, noting that the poor results could increase the odds of activist investor action. DB rates Colgate-Palmolive at Neutral and assigns a price target of $75.
Colgate-Palmolive (NYSE:CL) reports global unit volume declined 1% in Q2.
Organic sales were even Y/Y.
North America net sales dropped 3.7% to $764M.
Latin America net sales rose 6.8% to 1B.
Gross margin rate improved 50 bps to 60.7%, driven by cost savings from the Company’s funding-the-growth initiatives and the 2012 Restructuring Program, and higher pricing
SG&A expenses +40 bps to 34.4% of sales.
Operating profit margin decreased 10 bps to 26%.
“As we look ahead, uncertainty in global markets and slowing category growth worldwide remain challenging. Based on current spot rates, we continue to expect a low-single-digit net sales increase for 2017, and given our slower than expected first half, we are now planning for low-single-digit organic sales growth for 2017." says CEO Ian Cook.
A fresh note from Bernstein pitches the idea that PepsiCo (NYSE:PEP) is a better target for Kraft Heinz (NASDAQ:KHC) than Colgate-Palmolive (NYSE:CL).
PepsiCo is seen having the right recipe of steady revenue growth, cost-cutting opportunities and an amenable management team. A pairing of PepsiCo and Kraft could also be easier for regulators to swallow due to the minimal overlap (~1.5% of PEP sales) of their businesses.
Bernstein has both PepsiCo and Kraft rated at Outperform.
Colgate-Palmolive (NYSE:CL) CEO Ian Cook recently signaled he would be open to selling the company, which has grappled with sluggish demand for its toothpaste, deodorants and food products, for $100 a share.
According to the NY Post, the $88B price tag surfaced at a meeting with institutional investors that took place in recent weeks.
Among the possible suitors: UL, PG, JNJ and 3G Capital.
3G Capital says it will only make friendly deals in the future after failing to land Unilever (UN, UL) for Kraft Heinz (NASDAQ:KHC).
"We don’t need to go anywhere that we are not welcome by shareholders in order to do a deal," says 3G CEO and Kraft Chairman Alex Behring.
The less disruptive path tipped by 3G could have implications for a wide range of companies seen trading with a M&A premium. That list includes General Mills (NYSE:GIS), Kellogg (NYSE:K), Colgate-Palmolive (NYSE:CL), Kimberly-Clark (NYSE:KMB), Mondelez International (NASDAQ:MDLZ), PepsiCo (NYSE:PEP), Anheuser-Busch InBev (NYSE:BUD), Hain Celestial (NASDAQ:HAIN), Diageo (NYSE:DEO), Campbell Soup (NYSE:CPB), and Coca-Cola (NYSE:KO) in various short-term and long-term scenarios of 3G pulling the strings on a mega-merger.
"We will evaluate any opportunity that makes strategic sense, always with the objective of growing for the long term whether in the US or internationally," notes Behring in a rare public update on 3G strategy.