Colgate-Palmolive (NYSE: CL) was downgraded to Hold from Buy at TD Cowen on Tuesday, as rising input costs tied to the Iran War threaten to erode the consumer giant’s profit margins. The firm cut its price target on the stock to $85 from $96.
"We are moving to the sidelines as the combination of inflationary pressure from higher prices of oil-based inputs and potentially higher costs for tallow creates a headwind for the company," analyst Robert Moskow said in a note.
The downgrade reflects specific cost pressures facing the company. Prices for tallow, a key ingredient, are up 40 percent on the Chicago Mercantile Exchange compared to a year ago, Moskow noted. This is compounded by a broader surge in oil prices following the outbreak of the Iran War, which affects costs for plastics used in packaging and other raw materials. The new $85 price target implies a more limited upside from the stock's current levels.
| Data Point | Previous | New |
|---|---|---|
| Rating | Buy | Hold |
| Price Target | $96 | $85 |
The pressure on Colgate-Palmolive highlights a potential challenge for the wider consumer staples sector, which is often seen as a defensive haven during periods of economic uncertainty. While companies like Colgate have strong brand loyalty, sustained increases in input costs could force them to raise prices, potentially hurting sales volumes, or absorb the costs and accept lower profitability. The downgrade follows several others across Wall Street, including a cut for Phreesia (PHR) by Truist after a reduced revenue outlook.
This downgrade suggests that even defensive stocks are not immune to specific commodity-driven headwinds. Investors will be closely watching the company's next earnings report for commentary on margin outlook and pricing strategies.
This article is for informational purposes only and does not constitute investment advice.
