Colgate-Palmolive's (CL) Q2 results were positive, and visibility is improving for its organic sales growth to sustainably return to the 3% to 4% range in the second half of 2026 and 2027, supported by robust emerging-markets growth, solid pricing power, share gains in pet and oral care, and the easing impact of private-label pet discontinuations, Morgan Stanley said Monday in an emailed note.
Management believes growth in the pet category has likely bottomed. Morgan Stanley expects second-half volume to rebound as private-label headwinds abate, supported by continued share gains at Hill's Pet Nutrition and solid first-half advertising investment, the note added.
Geopolitical volatility and high oil prices remain an overhang for emerging-markets consumers, tempering expectations for a broader category rebound in the second half.
However, Colgate expects stronger emerging-markets growth in the second half, supported by easier third-quarter reformulation comparisons in Latin America, the brokerage said.
The company raised its 2026 gross-margin guidance from a year-over-year decline to "roughly flat" on slightly lower input-cost expectations.
This lifted its full-year EPS guidance to the mid-single-digit growth range from the previous low- to mid-single-digit range. The new EPS midpoint of $3.88 is 2% above consensus, which Morgan Stanley expects to increase, according to the note.
Morgan Stanley kept an overweight rating on Colgate-Palmolive and raised its price target to $104 from $100.
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