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Colgate (CL) Q3 Earnings Beat Estimates, Sales Rise Y/Y

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Colgate-Palmolive Company (CL - Free Report) reported third-quarter 2021 results, with earnings and sales beating the Zacks Consensus Estimate. Both the top and the bottom line increased year over year.

Results gained from growth in volumes as well as higher pricing. Management highlighted that the company was able to achieve organic sales growth despite a difficult year-on-year comparison, restricted mobility as well as supply chain disruptions stemming from the pandemic. The company’s bottom line also witnessed growth, in spite of of hurdles stemming from a rise in raw material and logistics costs. The company expects costs related headwinds to persist in the forthcoming quarters as well.    

While the company is impressed by third-quarter results, it is cautious regarding the headwinds surrounding the pandemic, supply chain disruptions, demand volatility and currency rates. Management continues to focus on investing in business advancement opportunities as well as executing strategies to deliver sustainable growth. That said, the company reiterated its guidance for 2021.

Quarter in Detail

On a Base Business basis (adjusted non-GAAP), earnings of 81 cents per share rose nearly 3% from the prior-year quarter’s levels and surpassed the Zacks Consensus Estimate of 79 cents. On a GAAP basis, earnings declined 7% to 75 cents per share in the quarter under review.

Net sales of $4,414 million increased 6.5% from the year-ago quarter’s levels and beat the Zacks Consensus Estimate of $4,410 million. On an organic basis, the company’s sales advanced 4.5%. The company’s top-line performance was driven by higher volumes and improved pricing. This marked the 11th successive quarter of organic sales growth within or beyond its targeted range of 3-5%. Total volumes increased 1.5% on both reported and organic basis, while pricing was up 3% and favorable currency impact was 2%.

Gross profit amounted to $2,623 million, which increased 3.3%. Gross profit margin contracted 180 basis points (bps) to 59.4% both on a GAAP and an adjusted basis.

Adjusted operating profit came in at $967 million, down 3% year over year, while adjusted operating margin contracted 220 bps to 21.9%.

Selling, general & administrative (SG&A) expenses increased 7.8% year over year to $1,636 million. As a percentage of sales, SG&A expenses escalated 50 bps to 37.1%.

Colgate’s market share of manual toothbrushes reached 31% year to date. The company continued with its leadership position in the global toothpaste market, with a market share of 39.5%.

ColgatePalmolive Company Price, Consensus and EPS Surprise

 

ColgatePalmolive Company Price, Consensus and EPS Surprise

ColgatePalmolive Company price-consensus-eps-surprise-chart | ColgatePalmolive Company Quote

 

Segmental Discussion

North America’s net sales (21% of total sales) increased 1% year on year. The unit benefitted 0.5% each from pricing and positive currency impact. Organic sales inched up 0.5% on growth in oral care that was partially offset by organic sales declines in personal care and home care categories. Consumer demand in certain categories declined year on year due to the easing of pandemic-led impacts. Year to date, the company’s share in the toothpaste market is 34.3% and 39.3% in the manual toothbrush market in the United States.

Latin America’s net sales (21% of total sales) rose 11% year over year on 5.5% gains in pricing, 3% favorable currency and 2.5% volume growth. On an organic basis, sales were up 8%, led by growth in Brazil, Argentina, Columbia and Mexico. Organic volumes rose 2.5% in the quarter.

Europe’s net sales (16% of total sales) increased 1% year over year on a reported basis. The unit saw 2% positive currency impact, while volumes were down 1%.  Organic sales and volumes were each down 1%. Organic sales were adversely impacted by declines in the Filorga duty-free business and France, partially offset by organic sales growth in the U.K. and Germany.

The Asia Pacific segment’s net sales (17% of total sales) increased 1% year over year due to a 0.5% increase in pricing and a 1.5% favorable impact of foreign exchange. Volumes were down 1% both on a reported and organic basis. Organic sales fell 0.5%, driven by declines in the Greater China region and Australia, partially mitigated by organic sales growth in India.

Africa/Eurasia’s net sales (6% of total sales) increased 1% year over year due to a 3.5% increase in pricing and a 2% favorable impact of foreign exchange. Volumes were down 4.5% both on a reported and organic basis. Organic sales for the segment went down 1%, driven by declines in the North Africa/Middle East region and South Africa, partially countered by organic sales growth in Turkey and the Eurasia region

Hill’s Pet Nutrition’s net sales (19% of total sales) rose 20% from the year-ago quarter’s levels on a reported basis and 19% on an organic basis. Results gained from a 11% increase in unit volumes (both reported and organic), 8% pricing growth and a 1% positive currency impact. Organic sales were aided by gains in the United States and Europe.

Other Financial Details

Colgate ended third-quarter 2021 with cash and cash equivalents of $958 million and total debt of $7,696 million. Net cash provided by operating activities amounted to $2,219 million for the nine months ended Sep 30, 2021.

Zacks Investment ResearchImage Source: Zacks Investment Research

Outlook

Management reinstated its guidance for 2021. The company continues to predict net sales growth of 4-7%, with a low-single-digit favorable currency impact. Organic sales are likely to rise 3-5%, which is within its long-term target range. Colgate expects gross margin to decline on a GAAP as well as on an adjusted basis. Advertising investments are expected to reflect a rise. The company anticipates bottom line growth to be at the lower end of the guidance of low to mid-single digits, on a GAAP basis. On an adjusted basis, earnings growth is expected to be at the lower end of mid to high-single-digit range. The company’s guidance is based on the current spot rates.

Price Performance

Shares of this Zacks Rank #4 (Sell) company have dropped 3.1% in the past three months, all most in line with the industry’s decline.

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