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Colgate-Palmolive Co. , a global dealer in consumer goods, reported fourth-quarter 2013 adjusted earnings of 75 cents per share that came a penny ahead of the Zacks Consensus Estimate and rose 7.1% from the year-ago quarter adjusted earnings of 70 cents.

Global sales of $4,361 million increased 2.0% from the prior-year quarter level of $4,286 million, primarily benefiting from a 6.5% rise in global unit volumes, partially offset by a negative impact of 4.5% from foreign exchange rates. However, quarterly revenues fell short of the Zacks Consensus Estimate of $4,391 million.

On an organic basis (excluding foreign exchange, acquisitions and divestitures), the company recorded sales growth of 6.5%.

Adjusted gross profit margin expanded 50 basis points (bps) to 58.9%, driven by better cost containment. This was partially offset by increased raw and packaging material expenses.

Adjusted selling, general and administrative (SG&A) expenses, as a percentage of revenues, grew 10 bps from the year-ago quarter to 34.5%.  The rise was mainly due to higher advertising investment and lower overhead costs, both as a percentage of sales.

In the quarter, adjusted operating profit of $1,074 million increased 4% from $1,035 million from the year-ago period. Consequently, operating margin improved 50 bps to 24.6%.

In 2013, Colgate-Palmolive’s market share of global toothpaste and manual toothbrushes reached 44.9% and 32.8%, respectively. Additionally, the company’s mouthwash business has made significant progress, with its global market share reaching a record of 17% in the year, a 130-bp improvement from 2012.

Segment Discussion

North America sales (18% of total sales) rose 2.5% in the quarter, driven by a 4% rise in unit volume and flat pricing, partly offset by a negative impact of 1% and 0.5% from lower pricing and foreign exchange, respectively. On an organic basis, sales increased 3%.

Segment operating profit increased 5% to $241 million, while operating margin expanded nearly 70 bps to 31.2%. The year-over-year rise in operating profit margin was chiefly driven by increased gross profit margin, which was partially offset by higher SG&A expenses as a percentage of net sales.

Latin America sales (29% of total sales) inched up 1% year over year, primarily driven by a 10% increase in pricing and 2.5% unit volume growth, partially offset by a negative foreign exchange impact of 11.5%. Volume gains were most prominent in Venezuela, Brazil, Mexico and Colombia. On an organic basis, sales increased 12.5%.

Operating profit increased 3% to $363 million while as a percentage of sales, it improved 50 bps to 28.7% primarily due to lower SG&A expenses as a percentage of sales, which was partially offset by decline in gross profit margin.

Europe/South Pacific sales (19% of total sales) dipped 0.5% year over year, as the benefit of 2.5% rise in unit volume and 1.5% positive impact from foreign exchange were more than offset by a 4.5% downside in pricing. Volume gains were primarily led by the United Kingdom, Australia and Poland. Organic sales for the region were down 1.5%.

However, operating profit increased 7% year over year to $200 million. Furthermore, the operating profit margin in the region expanded 160 bps to 23.7% attributable to higher gross profit margin, which was partially offset by increased SG&A expenses as a percentage of sales.

Asia sales (14% of total sales) climbed 4.5%, with a 10.5% increase in unit volume, offset by a 4.5% negative impact from foreign currency and 1.5% lower pricing. Volume growth was primarily led by gains in India, the Greater China region and the Philippines. On an organic basis, sales grew 9%.

Operating profit rose 14% to $165 million. Operating margin expanded 230 basis points to 28.8%, on account of improved gross margin and lower SG&A expenses as a percentage of sales.

Africa/Eurasia sales (7% of total sales) inched up 0.5% year over year, driven by 6% growth in unit volume and 1% increase in prices, offset by a 6.5% negative impact from foreign currency exchange. Volume gains were primarily led by Russia, the Sub-Saharan Africa region, Turkey and the Central Asia/Caucasus region. Organic sales for the region rose 7%.

Operating profit increased 9% year over year to $76 million, while operating margin expanded 170 basis points to 23.4%. The increase was driven by higher gross profit margin and decrease in SG&A expenses as a percentage of sales.

Hill’s Pet Nutrition sales (13% of total sales) grew 4.5%. Unit volume increased 4% due to volume gains in U.S., Russia and Canada, partly offset by volume declines in Japan. Pricing had a 3% positive impact on sales growth, while foreign exchange negatively impacted sales by 2.5%. On an organic basis, sales rose 7% from the year-ago quarter.

Operating profit improved 3% to $153 million, whereas operating profit margin contracted 50 bps to 26.2%. The decline in operating margin was due to lower gross profit margin, partially offset by reduced SG&A expenses as a percentage of net sales.

Full-Year Synopsis

For 2013, the company’s adjusted earnings came at $2.84 per share, up 6% from 2012 and surpassed the Zacks Consensus Estimate by a penny. Revenues for the year rose approximately 2% to $17,420 million. However, the company’s top line missed the Zacks Consensus Estimate of $17,451 million.

Other Financial Details

Colgate-Palmolive, which competes with The Procter & Gamble Co. , ended the fiscal with cash and cash equivalents of $962 million, total debt of $5,657 million and shareholders’ equity of $2,305 million. Net cash provided by operating activities came in at $3,204 million for the period.

Guidance

Looking ahead, Colgate-Palmolive anticipates its growth momentum to continue into 2014 as it remains on track with its global restructuring program. Further, the company’s stringent focus on funding-the-growth programs and strategic worldwide pricing endeavors should help boost its bottom line. As a result, the company expects strong earnings well as gross margin expansion in 2014.

Other Stocks to Consider

Currently, Colgate-Palmolive carries a Zacks Rank #4 (Sale). However, some better-ranked stocks in the consumer staples sector that are worth considering include Chemtura Corp. and Sensient Technologies Corp. . All these stocks carry a Zacks Rank #2 (Buy).

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