RBC’s Confidence in Colgate-Palmolive’s Margins and Cash Flow Might Change The Case For Investing In CL

• Recently, RBC Capital upgraded Colgate-Palmolive to Outperform, citing the company’s large revenue base, strong pricing power, and best-in-class gross margin of 60.3% as reasons for greater confidence in its outlook.
• The upgrade also highlights Colgate-Palmolive’s robust free cash flow generation, which provides flexibility to both invest in growth initiatives and return capital to shareholders.
• We’ll now explore how RBC’s increased confidence in Colgate-Palmolive’s earnings resilience could influence the company’s existing investment narrative.

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Colgate-Palmolive Investment Narrative Recap

To own Colgate-Palmolive, you have to believe its global oral care and pet nutrition franchises can keep converting brand strength and pricing power into steady cash generation, even as volumes and input costs fluctuate. RBC’s upgrade, rooted in confidence around earnings resilience and free cash flow, supports that view but does not materially change the key near term catalyst, which remains category and volume stabilization, or the biggest risk, which is ongoing pressure from raw material and packaging costs.

Among recent company announcements, the ongoing share repurchase program, with roughly US$515.8 million spent to retire about 0.73% of shares since March 2025, is especially relevant in light of RBC’s focus on free cash flow. It reinforces the idea that Colgate-Palmolive’s cash generation can both support reinvestment in innovation and digital initiatives and fund capital returns, which may help offset softer organic sales guidance while investors wait for demand and category trends to firm up.

But against this backdrop of strong margins and cash returns, investors should be aware of the risk that rising palm oil and packaging costs could...

Read the full narrative on Colgate-Palmolive (it's free!)

Colgate-Palmolive's narrative projects $22.4 billion revenue and $3.5 billion earnings by 2028. This requires 3.8% yearly revenue growth and a $0.6 billion earnings increase from $2.9 billion today.

Uncover how Colgate-Palmolive's forecasts yield a $87.21 fair value, a 13% upside to its current price.

Exploring Other Perspectives

Four fair value estimates from the Simply Wall St Community span roughly US$87 to US$122.8, showing how far apart individual views can be. Set against RBC’s emphasis on Colgate-Palmolive’s gross margin strength, this spread underlines why you may want to compare several perspectives before deciding how resilient the business really is to cost inflation and slower volume growth.

Explore 4 other fair value estimates on Colgate-Palmolive - why the stock might be worth just $87.00!

Build Your Own Colgate-Palmolive Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Colgate-Palmolive research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Colgate-Palmolive research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Colgate-Palmolive's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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