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Colgate-Palmolive (CL) Up 2.9% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Colgate-Palmolive Company (CL - Free Report) . Shares have added about 2.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Colgate Beats on Q1 Earnings, Misses on Revenues
Colgate delivered positive earnings surprise in first-quarter 2017. The company posted adjusted earnings of $0.67 a share that came a penny ahead of the Zacks Consensus Estimate and improved 6.3% from $0.63 earned in the prior-year quarter. Margin expansion and lower tax rate favorably impacted the bottom line.
Including one-time items, earnings came in at $0.64 a share compared with $0.59 reported in the year-ago period.
Deeper Insight
Total sales of $3,762 million remained flat with the year-ago period but came below the Zacks Consensus Estimate of $3,799 million. The benefits of 2.5% increase in prices were offset by a 2% drop in global unit volumes and a negative impact of 0.5% from currency fluctuations.
On an organic basis (excluding foreign exchange, acquisitions and divestitures), the company recorded sales growth of 0.5% on the back of 3% growth in organic sales in emerging markets. Management informed that organic sales growth failed to meet expectations on account of sluggish results in North America.
Adjusted gross profit margin was 60.7%, up 70 basis points (bps), backed by benefits of cost-saving initiatives under the company’s funding-the-growth and 2012 Restructuring Program, along with better pricing. These were partly neutralized by increased raw and packaging material expenses.
In the reported quarter, adjusted operating profit of $931 million increased 1%, with the adjusted operating margin improving 20 bps to 24.7% on enhanced gross margin, partly offset by a 30 bps increase in adjusted selling, general & administrative expenses as a percentage of sales.
Year to date, Colgate’s market share of manual toothbrushes reached 32.7%. Further, the company continued to lead with market share in the global toothpaste with a gain of 43.8% year to date.
Segment Discussion
North America net sales (20% of total sales) fell 5%, reflecting a 5% drop in unit volume and a 0.5% decline in pricing, partially offset by a positive impact of 0.5% from currency fluctuations. On an organic basis, sales declined 5.5%.
Latin America net sales (25% of total sales) jumped 9% year over year gaining from 7% increase in pricing and positive impact of 2% from currency fluctuations, while unit volume remained flat with the prior-year quarter. Excluding the impact of divested businesses, unit volume inched up 0.5% driven by gains in Mexico, the Caribbean region and the Southern Cone region, offset by volume declines in Brazil. On an organic basis, sales increased 7.5%.
Europe net sales (15% of total sales) slipped 5% year over year, owing to 1% decline in pricing and negative impact of 4.5% from currency fluctuations, partially offset by 0.5% increase in unit volume. Unit volumes gains in the United Kingdom, Spain and the Netherlands were partly offset by declines in France. Europe organic sales dipped 0.5%.
Asia Pacific net sales (19% of total sales) declined 3%, attributable to 1% decline in unit volume and 2% negative impact from currency fluctuations. Pricing remained flat with the year-ago quarter. Unit volumes declines in India, the Greater China region and Thailand were partly offset by gains in the South Pacific region, Vietnam and the Philippines. On an organic basis, sales for Asia Pacific decreased 1%.
Africa/Eurasia net sales (6% of total sales) rose 6.5% year over year, fueled by 7% jump in pricing and positive currency effects of 6%, partly offset by 6.5% drop in unit volumes. Unit volumes declines in the Sub Saharan Africa region and Russia were partly offset by gains in the North Africa/Middle East region. Organic sales for Africa/Eurasia inched up 0.5%.
Hill’s Pet Nutrition net sales (15% of total sales) inched up 0.5% year over year. During the quarter, positive impact from 4% increase in pricing and 0.5% gain from foreign exchange was somewhat offset by 4% drop in unit volume. Unit volume declines in the United States, Western Europe and Turkey were partially offset by gains in South Africa, Russia and Thailand. On an organic basis, sales were flat with the prior-year quarter.
Other Financial Details
Colgate ended the quarter with cash and cash equivalents of $1,347 million and total debt of $6,473 million. Net cash provided by operating activities came in at $691 million for the quarter.
Outlook
Looking forward, Colgate anticipates the backdrop to remain challenging due to uncertain global markets. Hence, it continues to expect net sales for 2017 to improve in low-single digits range. However, on account of the soft start to the year, management now envisions organic sales growth for 2017 to be moderately below 4–7% range but expects to register sequential improvement throughout the year.
On a GAAP basis, management forecasts gross margin expansion for the year but expects earnings per share to be flat on a dollar basis. Excluding charges related to the 2012 Restructuring Program and the other 2016 one-time items, Colgate continues to project low-single-digit earnings per share growth on a dollar basis for 2017. Further, the company expects robust operating cash flows, gross margin expansion and rise in advertising investment for the year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There has been one revision higher for the current quarter compared to five lower.
At this time, Colgate-Palmolive's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Colgate-Palmolive (CL) Up 2.9% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Colgate-Palmolive Company (CL - Free Report) . Shares have added about 2.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Colgate Beats on Q1 Earnings, Misses on Revenues
Colgate delivered positive earnings surprise in first-quarter 2017. The company posted adjusted earnings of $0.67 a share that came a penny ahead of the Zacks Consensus Estimate and improved 6.3% from $0.63 earned in the prior-year quarter. Margin expansion and lower tax rate favorably impacted the bottom line.
Including one-time items, earnings came in at $0.64 a share compared with $0.59 reported in the year-ago period.
Deeper Insight
Total sales of $3,762 million remained flat with the year-ago period but came below the Zacks Consensus Estimate of $3,799 million. The benefits of 2.5% increase in prices were offset by a 2% drop in global unit volumes and a negative impact of 0.5% from currency fluctuations.
On an organic basis (excluding foreign exchange, acquisitions and divestitures), the company recorded sales growth of 0.5% on the back of 3% growth in organic sales in emerging markets. Management informed that organic sales growth failed to meet expectations on account of sluggish results in North America.
Adjusted gross profit margin was 60.7%, up 70 basis points (bps), backed by benefits of cost-saving initiatives under the company’s funding-the-growth and 2012 Restructuring Program, along with better pricing. These were partly neutralized by increased raw and packaging material expenses.
In the reported quarter, adjusted operating profit of $931 million increased 1%, with the adjusted operating margin improving 20 bps to 24.7% on enhanced gross margin, partly offset by a 30 bps increase in adjusted selling, general & administrative expenses as a percentage of sales.
Year to date, Colgate’s market share of manual toothbrushes reached 32.7%. Further, the company continued to lead with market share in the global toothpaste with a gain of 43.8% year to date.
Segment Discussion
North America net sales (20% of total sales) fell 5%, reflecting a 5% drop in unit volume and a 0.5% decline in pricing, partially offset by a positive impact of 0.5% from currency fluctuations. On an organic basis, sales declined 5.5%.
Latin America net sales (25% of total sales) jumped 9% year over year gaining from 7% increase in pricing and positive impact of 2% from currency fluctuations, while unit volume remained flat with the prior-year quarter. Excluding the impact of divested businesses, unit volume inched up 0.5% driven by gains in Mexico, the Caribbean region and the Southern Cone region, offset by volume declines in Brazil. On an organic basis, sales increased 7.5%.
Europe net sales (15% of total sales) slipped 5% year over year, owing to 1% decline in pricing and negative impact of 4.5% from currency fluctuations, partially offset by 0.5% increase in unit volume. Unit volumes gains in the United Kingdom, Spain and the Netherlands were partly offset by declines in France. Europe organic sales dipped 0.5%.
Asia Pacific net sales (19% of total sales) declined 3%, attributable to 1% decline in unit volume and 2% negative impact from currency fluctuations. Pricing remained flat with the year-ago quarter. Unit volumes declines in India, the Greater China region and Thailand were partly offset by gains in the South Pacific region, Vietnam and the Philippines. On an organic basis, sales for Asia Pacific decreased 1%.
Africa/Eurasia net sales (6% of total sales) rose 6.5% year over year, fueled by 7% jump in pricing and positive currency effects of 6%, partly offset by 6.5% drop in unit volumes. Unit volumes declines in the Sub Saharan Africa region and Russia were partly offset by gains in the North Africa/Middle East region. Organic sales for Africa/Eurasia inched up 0.5%.
Hill’s Pet Nutrition net sales (15% of total sales) inched up 0.5% year over year. During the quarter, positive impact from 4% increase in pricing and 0.5% gain from foreign exchange was somewhat offset by 4% drop in unit volume. Unit volume declines in the United States, Western Europe and Turkey were partially offset by gains in South Africa, Russia and Thailand. On an organic basis, sales were flat with the prior-year quarter.
Other Financial Details
Colgate ended the quarter with cash and cash equivalents of $1,347 million and total debt of $6,473 million. Net cash provided by operating activities came in at $691 million for the quarter.
Outlook
Looking forward, Colgate anticipates the backdrop to remain challenging due to uncertain global markets. Hence, it continues to expect net sales for 2017 to improve in low-single digits range. However, on account of the soft start to the year, management now envisions organic sales growth for 2017 to be moderately below 4–7% range but expects to register sequential improvement throughout the year.
On a GAAP basis, management forecasts gross margin expansion for the year but expects earnings per share to be flat on a dollar basis. Excluding charges related to the 2012 Restructuring Program and the other 2016 one-time items, Colgate continues to project low-single-digit earnings per share growth on a dollar basis for 2017. Further, the company expects robust operating cash flows, gross margin expansion and rise in advertising investment for the year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There has been one revision higher for the current quarter compared to five lower.
Colgate-Palmolive Company Price and Consensus
Colgate-Palmolive Company Price and Consensus | Colgate-Palmolive Company Quote
VGM Scores
At this time, Colgate-Palmolive's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.