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Colgate-Palmolive Underappreciated, Deutsche Bank Says, Lifting to Buy

Colgate-Palmolive stock was upgraded to buy with an $86 price target at Deutsche Bank.

Shares of Colgate-Palmolive  (CL) - Get Colgate-Palmolive Company Report were higher in a sharply lower broad market after analysts at Deutsche Bank upgraded the consumer-goods titan to buy from hold while raising its price target to $86 a share from $84.

At last check Colgate-Palmolive shares were 0.4% higher at $76.55.

The New York company has made "significant strides" over the past three years in updating its corporate culture with a healthier "growth mindset," a fact that markets are overlooking, the investment firm said. 

"With respect to culture and CL's improved strategic priorities, we continue to see CL positioning itself for better growth and profitability long term by premiumizing the portfolio and bolstering the company's overall brand-building muscle and digital capabilities," analyst Steve Powers wrote.

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Powers does say that the company's organic second-quarter growth of 5% was short of his firm's expectations of 6% growth. 

While Deutsche Bank sees cost and supply pressures weighing on Colgate-Palmolive, those pressures are facing most companies in the consumer products category. 

Conditions in China could also be a headwind for CL in the final months of the year. The U.S. market has presented a challenge for the company with distribution and logistics issues from the first half continuing. 

Overall, "while CL does have challenges, we believe investor expectations are implicitly 'eyes-wide-open' to them, and further see positive improvements on the near- to medium-term horizon," Powers said. 

"Against the backdrop of a quality franchise making the right strategic investments for the long term, we see such a setup as compelling for investors (especially those with a 12-month horizon)."