Colgate-Palmolive Co.

The stable outlook reflects our expectation that Colgate will generate steady revenue and profit growth, while also returning substantially all FOCF to shareholders through dividends and share repurchases, resulting in leverage in the high-1x area over the next couple years. We could lower the rating if: We believe debt to EBITDA will weaken and be sustained above 2x. This could occur if the company makes debt-financed acquisitions without moderating share repurchase activity, signaling a more aggressive financial policy. We revise our view of Colgate's business risk, potentially due to weakening profitability. This could occur if organic growth stagnates, emerging market economies deteriorate, or the company is unable to pass through rising commodity costs. An upgrade is highly unlikely over the

...Good geographic diversity will help company sustain healthy organic revenue growth despite lapping difficult comps. The COVID-19 pandemic caused a surge in demand for Colgate-Palmolive Co.'s soaps and household cleaning products in 2020, particularly in North America, where restrictions were comparatively looser than other regions. Revenue from its North American business is now declining as the company laps the benefits from pantry loading and elevated consumption in these categories. Nevertheless, we believe softness in North America will be offset by stronger performance in regions that had more stringent lockdown measures in 2020 and by restored growth in other product categories (e.g., skincare) that benefit from improved social mobility. This will be complemented by still strong growth in its Hill's pet food business, which continues to grow at double-digit-percent organic growth rates. We expect this will enable the company to sustain organic revenue growth in its target 3%-5% range....

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