Colgate's Q2 Sales Sparkle Amid a Decaying Macro Backdrop; Shares Fairly Valued

We don’t expect to alter materially our $75 fair value estimate for wide-moat Colgate after digesting what we perceived as solid second-quarter numbers. Organic sales shot up 9% (almost entirely driven by increased prices) despite lapping 5% growth last year, marking its highest quarterly growth metric since the fourth quarter of 2008. We attribute this performance to the firm’s deliberate focus on innovating at the value and premium price tiers, while investing in marketing (more than 11% of sales in quarter) and digital capabilities. This manifested in improving share positions in global toothpaste and toothbrushes (to 39.6% and 31.3%, respectively) relative to the year-ago period, on top of its already dominant oral-care standing. And while we acknowledge the multiple facets (the grocery store, the gas station, and interest rates, among others) squeezing consumers' pocketbooks, we believe Colgate is uniquely positioned, as it is not just dependent on selling its wares at the shelf because of its entrenched relationships with industry professionals (dentists, veterinarians, and dermatologists) that should support continued growth irrespective of the macro climate.