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Colgate-Palmolive Co. (CL - Analyst Report), a global dealer in consumer goods, reported third-quarter 2013 adjusted earnings of 73 cents a share that came in line with the Zacks Consensus Estimate and rose 5.8% from the year-ago quarter’s adjusted earnings of 69 cents.

Global sales of $4,398 million increased 1.5% from the prior-year quarter’s level of $4,332 million, primarily benefiting from a 5.0% rise in global unit volumes and 1.0% upside in pricing, partially offset by a negative impact of 4.5% from foreign exchange. However, quarterly revenue fell short of the Zacks Consensus Estimate of $4,468 million.

On an organic basis (excluding foreign exchange, acquisitions and divestitures), the company recorded sales growth of 6.0%.

Adjusted gross profit margin expanded 40 basis points (bps) to 59.0%, driven by better pricing and cost containment endeavors. This was more than offset by increased raw and packaging material expenses.

Adjusted selling, general and administrative (SG&A) expenses, as a percentage of revenue, grew 40 bps from the year-ago quarter to 35.0%.  The rise was mainly due to higher advertising investment and flat overhead costs, both as a percentage of sales.

In the quarter, adjusted operating profit of $1,049 million climbed 1.2% from $1,037 million compared to the year-ago period, while operating margin remained flat compared to the prior-year quarter at 23.9%.

On a year-to-date basis, Colgate-Palmolive’s market share of global toothpaste and manual toothbrushes reached 45.0% and 33.4%, respectively. Additionally, the company’s mouthwash business has made significant progress, with its worldwide market share reaching a record of 16.8% year to date, a 130 basis points improvement from the year-ago period.

Segment Discussion

North America sales (18% of total sales) rose 1.0% in the quarter, driven by a 1.5% rise in unit volume and flat pricing, partly offset by a 0.5% negative impact from foreign exchange. On an organic basis, sales increased 1.5%.

Segment operating profit surged 15% to $244 million, while operating margin expanded nearly 370 bps to 31.5%. The year-over-year rise in operating profit margin was chiefly driven by increased gross profit margin and lower SG&A expenses as a percentage of net sales.

Latin America sales (29% of total sales) dipped 2.0% year over year, primarily driven by a 3.5% increase in pricing and 5.5% unit volume growth, partially offset by a negative foreign exchange impact of 11.0%. Volume gains were most prominent in Mexico, Brazil, Venezuela and Central America. On an organic basis, sales increased 9.5%.

However, operating profit declined 5.0% to $358 million from the prior-year quarter primarily due to lower gross profit margin and higher SG&A expenses as a percentage of sales. Moreover, operating margin contracted 90 bps to 28.6%.

Europe/South Pacific sales (20% of total sales) increased 1.5% year over year, driven by 2.0% growth in unit volume along with 1.0% positive impact from foreign currency exchange, offset by a 1.5% downside in pricing. Volume gains were primarily led by Poland, Germany and Australia. Organic sales for the region were up 1.0%.

Operating profit increased 9.0% year over year to $216 million. Furthermore, the operating profit margin in the region expanded 160 bps to 24.5%, driven by higher gross profit margin and lower SG&A expenses as a percentage of sales.

Asia sales (14% of total sales) climbed 7.5%, with an 11.0% increase in unit volume and 0.5% lower pricing, offset by a 3.0% negative impact from foreign currency. Volume growth was primarily led by gains in India, the Greater China region and the Philippines. On an organic basis, sales grew 10.5%.

Operating profit jumped 6.0% to $174 million. Operating margin contracted 30 basis points to 27.8%, on account of higher SG&A expenses, as a percentage of sales, partly offset by improved gross margin.

Africa/Eurasia sales (7% of total sales) increased 2.0% year over year, driven by 7.5% growth in unit volume and 1.0% increase in prices, offset by a 6.5% negative impact from foreign currency exchange. Volume gains were primarily led by Turkey, the Sub-Saharan Africa region, the Central Asia/Caucasus region and Russia. Organic sales for the region rose 8.5%.

Operating profit dipped 3.0% year over year to $65 million, while operating margin contracted 110 basis points to 20.2%. The decline was driven by higher gross profit margin, more than offset by the increase in SG&A expenses as a percentage of sales.

Hill’s Pet Nutrition sales (12% of total sales) inched up 3.0%. Unit volume increased 3.0% due to volume gains in U.S. and Russia, partly offset by volume declines in Japan. Pricing had a 3.0% positive impact on sales growth, while foreign exchange negatively impacted sales by 2.0%. On an organic basis, sales rose 6.0% from the year-ago quarter.

Operating profit slipped 6.0% to $138 million, whereas operating profit margin contracted 250 bps to 25.3%. The decline was due to lower gross profit margin and higher SG&A expenses, as a percentage of net sales.

Other Financial Details

Colgate-Palmolive ended the quarter with cash and cash equivalents of $721 million, total debt of $5,284 million and shareholders’ equity of $1,784 million. Net cash provided by operating activities came in at $2,365 million for the nine months ended Sep 30, 2013.

Guidance

Looking ahead, Colgate-Palmolive anticipates its growth momentum to continue into 2013 as it remains on track with its global restructuring program. Further, the company’s stringent focus on the funding-the-growth programs and strategic worldwide pricing endeavors should help boost its bottom line.

As a result, the company expects strong organic sales as well as gross margin expansion in 2013. The company projects 4.5% to 5.5% growth in earnings per share for 2013. The company’s earnings for the year are expected to be impacted by currency devaluation in Venezuela and the recent fluctuations in foreign exchange in other countries.

Other Stocks to Consider

Colgate-Palmolive carries a Zacks Rank #3 (Hold). Other stocks in the consumer staples sector that are worth considering include Nu Skin Enterprises Inc. (NUS - Snapshot Report), Constellation Brands Inc. (STZ - Analyst Report) and Alico Inc. . All these stocks carry a Zacks Rank #1 (Strong Buy).

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