Brighter Smile At Colgate?

By Gene G. Marcial

The Gleam Is Off--For Now
Heavy outlays for ads, plus a jump in raw-material and fuel costs -- and pricing pressure from rivals -- forced Colgate-Palmolive (CL ) to warn the Street in September that 2004 profits wouldn't meet forecasts. There was a scramble to bail out of the stock, driving it down from 55 to 43 in a matter of days. But not everyone is fleeing: It's now at 46 -- "a good entry point to invest in one of the world's foremost brands," says Sarat Sethi of investment firm Douglas C. Lane & Associates, which has bought shares.

Colgate toothpaste, soaps, and pet food are sold in 200 lands. The stock has traded at a premium vs. its peers for years, says Sethi, and this chance to buy comes as Colgate is spending heavily on ads. He expects Colgate will announce a restructuring this month as part of its profit-lifting plan. He sees the stock at 55 to 60 in a year. He expects 2004 earnings to drop to $2.41 a share on sales of $10.5 billion, down from 2003's $2.46 on $9.9 billion -- but that should jump to $2.67 on $11.1 billion in 2005 and to $2.95 on $11.8 billion in 2006. William Chappell of SunTrust Robinson Humphrey, who still rates Colgate a buy, says it "will be rewarding to patient investors."

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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