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Colgate (CL) to Report Q4 Earnings: What's in the Offing?

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Colgate-Palmolive Company (CL - Free Report) is slated to release fourth-quarter 2020 results on Jan 29, before the opening bell. This leading global consumer products company is expected to have witnessed revenue and earnings growth in the to-be-reported quarter.

The Zacks Consensus Estimate for Colgate’s fourth-quarter earnings is pegged at 76 cents per share, suggesting 4.1% growth from the year-ago quarter’s reported figure. The consensus estimate has been unchanged in the past 30 days. For fourth-quarter revenues, the consensus mark is pegged at $4.17 billion, suggesting 3.8% growth from the prior-year reported figure.

In the last reported quarter, this global consumer products company delivered an earnings beat of 12.9%. Moreover, the company recorded an earnings surprise of 5%, on average, in the trailing four quarters.

ColgatePalmolive Company Price and EPS Surprise

ColgatePalmolive Company Price and EPS Surprise

ColgatePalmolive Company price-eps-surprise | ColgatePalmolive Company Quote

Factors to Note

Colgate has been gaining from continued strong demand for personal and home care products as well as the finest innovation across product categories. Its categories like liquid hand soap, dish liquid, bar soap and cleaners across all geographies have been contributing to the top line amid the coronavirus pandemic. Also, strong volume growth and robust pricing have been key growth drivers.

Moreover, it has been witnessing positive trends in the e-commerce platform, led by growth in the Hill’s business. The company has increased its focus on the online platform as more consumers are using online services for their essential needs, given the COVID-19 outbreak. We expect the robust online trend to have continued in the fourth quarter, impacts of which are expected to get reflected in the company’s top-line results.

Additionally, the company has been benefiting from innovation and in-store implementation, which have been the guiding principles of its growth strategy. It has been focused on expanding the availability of its products through enhanced distribution to newer markets and channels, which is likely to have helped improve its organic sales performance. It is focused on the premiumization of its Oral Care portfolio through major innovations.

Apart from North America, innovation in naturals and whitening across has been driving growth in the Latin America division, while premium innovation has been aiding the Colgate China business. Innovations along with accelerated investments in brands and higher pricing are likely to have aided the top line.

Colgate has been witnessing gross margin expansion for the past four quarters, driven by robust pricing and productivity gains. Notably, the company’s commitment toward pricing efforts through premiumization and revenue growth management has been paying off. This has resulted in organic sales growth and gross margin expansion. Moreover, its funding-the-growth endeavors have been contributing to productivity growth. These are likely to get reflected in the company’s bottom-line results in the to-be-reported quarter.

In spite of these tailwinds, concerns related to higher selling, general and administrative expenses, unfavorable currency fluctuations, and stiff competition cannot be ignored. Moreover, any escalation in raw and packaging-material expenses is expected to have impacted margins to an extent.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Colgate this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Colgate has a Zacks Rank #3 and an Earnings ESP of -0.56%.

Stocks With the Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Newell Brands, Inc. (NWL - Free Report) has an Earnings ESP of +2.70% and it sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Corteva, Inc. (CTVA - Free Report) has an Earnings ESP of +225.00% and holds a Zacks Rank #2.

e.l.f. Beauty Inc. (ELF - Free Report) has an Earnings ESP of +3.52% and carries a Zacks Rank #2.

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