Piper Sandler's $88 Target: A Tactical Bet on 2026 Reacceleration

The specific catalyst is clear. On Wednesday, Piper Sandler analyst Michael Lavery upgraded Colgate-Palmolive to Overweight from Neutral and raised its price target to $88. This is a tactical bet on a 2026 reacceleration, not a long-term endorsement. The firm's key rationale points to growth accelerating next year, driven by more moderate inflationary pressures and early signs of improvement in emerging markets.

The immediate risk/reward setup is defined by the stock's depressed valuation. At its current price, the upgrade suggests the stock is undervalued. Piper Sandler noted that current pressure on the company appears to be priced into the stock, which is trading near its 52-week low of $74.55. This creates a potential mispricing: if the firm's 2026 outlook is correct, the stock has room to climb from these lows.

Geographic diversification is a key part of this thesis. With emerging markets accounting for about 45% of sales and the U.S. representing only 33%, Colgate's exposure is less tied to a single slowing economy. This makes the company's trajectory more dependent on global trends, which Piper Sandler sees turning positive in 2026. The upgrade, therefore, is a bet that these external pressures are already reflected in the share price, leaving room for a rebound if the expected improvement materializes.

The Counter-Pressure: Near-Term Headwinds

The tactical bet on 2026 hinges on a future where these pressures ease. For now, they are tangible and costly. The most direct hit is from trade policy. Colgate-Palmolive expects to incur $200 million in increased costs related to tariffs enacted by the Trump administration in 2025. This impact will be felt across the second, third, and fourth quarters, primarily hitting raw materials and finished goods shipped between China and the U.S.

This is not an isolated cost. Rising raw material costs and ongoing tariff headwinds have already eroded margins, a point Argus made clear in its recent downgrade. The firm cited these pressures as key reasons the risk-reward is less compelling at current levels. In other words, the company is already paying a premium for its global footprint, and that cost is being passed through to the bottom line.

Management's response is a multi-year productivity program. The goal is to achieve adjusted operating margins in the mid-25% range in the medium term. To get there, the company is relying on initiatives like supply chain optimization and smarter sourcing to offset input cost pressures. These efforts did help deliver a mid-single-digit improvement in operating margins last quarter, partially cushioning the blow.

The bottom line is a race against time. The $200 million tariff hit is a known 2025 cost. The company must execute its productivity program to protect margins while waiting for the broader economic and inflationary environment to improve. If these near-term headwinds prove more persistent or severe than expected, they could derail the entire 2026 reacceleration thesis before it even gets off the ground.

Catalysts and What to Watch

For the Piper Sandler thesis to play out, investors need to watch a few specific near-term events. First, there's a tangible yield coming in February. The company has declared a quarterly cash dividend of $0.52 per common share, payable on February 13, 2026. This provides a near-term return and underscores the company's financial discipline, even as it navigates headwinds.

More importantly, the setup hinges on two key catalysts. The first is the Q4 2025 earnings report, which will offer the clearest signal on the "early signs of improvement in emerging markets" that Piper Sandler cited. Management has already noted that emerging markets are a major growth driver, and any acceleration in that segment will be critical for validating the 2026 reacceleration narrative.

The second, and more structural, catalyst is the execution of the Strategic Growth and Productivity Program. This multi-year initiative is the company's primary tool to protect margins against inflation and tariffs. Management has set a clear target: achieving adjusted operating margins in the mid-25% range in the medium term. The program's benefits are building gradually, with productivity initiatives already helping to offset cost pressures and deliver a mid-single-digit improvement in operating margins last quarter. Investors must watch for consistent progress here, as it will determine whether Colgate can maintain profitability while waiting for broader economic tailwinds.

Favorable currency trends are also expected to provide a tailwind, adding another layer of support. But the bottom line is that the upgrade is a forward-looking bet. The dividend offers a near-term floor, but the stock's path higher depends on the company delivering on both its geographic growth and its internal margin targets in the coming quarters.