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They told investors that the re-rating reflects the “modest multiple expansion on improving fundamentals coupled with what we view as undemanding current valuation.”
Stifel sees more upside than downside from current levels in the stock, “driven by modest multiple expansion reflecting estimated 2023 organic sales growth at least at the high-end of 5%-7% targets,” the analysts explained.
“Drivers of organic sales include carryover pricing and volume improvement, particularly in Hill’s,” they added. The firm also expects year-on-year global market share gains in toothpaste, which began in Q1 2022 following years of share underperformance, to continue.
“Lessening inflation and ongoing benefits from pricing and productivity should contribute to greater sequential gross margin expansion in 3Q23, and to EBIT/EPS growth,” continued the analysts. Stifel believes CL should at least achieve the current 2024 consensus organic sales expectations of 4%.
