Inflation Takes a Bite Out of Colgate's Q3 Margins, but Sales Shine Through; Shares Fairly Valued

In our view, wide-moat Colgate-Palmolive’s third-quarter marks affirm that the company is astutely navigating choppy waters. Organic sales jumped 7% (reflecting an 11.5% bump from higher prices, partially offset by a 4.5% volume retreat), marking Colgate’s 15th consecutive period of underlying gains in line with or above its 3%-5% long-term aim. We think this is a testament to the company's strategic priority to invest behind its brands through consumer-valued innovation across price tiers and marketing, which is proving particularly crucial as consumers battle higher prices at grocery stores and gas stations amid rising interest rates. The fruits of these efforts are witnessed in Colgate's share of the global and North American toothpaste markets expanding to nearly 40% and 35%, respectively, on top of its already dominant standing.