Are You Hubbing? If Not, Why Not?

Sure, most companies do their best to eliminate duplicate costs and functions, but Colgate-Palmolive's strategy of “hubbing” is also providing a lift to productivity, according to a new report by Citigroup, which reiterated a Buy rating and $79 price target on the stock. At press time, Colgate was up about 0.5% to 67.54 at the NYSE close.


In fact, analysts Wendy Nicholson, Samantha Berger and Beth Kite were so high on Colgate after a trip to Guatemala, that the trio said they were “terrifically impressed” with their meetings with local management and their firsthand look at hubbing “bolstered our confidence that CL is one of the best-managed companies among our coverage universe.”

According to Citigroup, Central America is a “small but terrific business” for Colgate: While it only generates about 4% of global sales, its gross and operating margins are higher than the corporate average. Moreover, while it already has a clear dominance in the region—for example it claims 85% of toothpaste sales—they believe that management is correct when it claims that Colgate will not only keep growing faster than Colgate’s overall 4%-7% organic growth target, but also continue expanding its margins faster than the rest of the business.