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Colgate (CL) Q2 Earnings & Sales Surpass Estimates, View Up
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Colgate-Palmolive Company (CL - Free Report) reported second-quarter 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. In the quarter, the company’s sales and earnings per share improved on a year-over-year basis. Colgate-Palmolive registered growth in all divisions and all four categories. The company raised its organic sales view for the full year.
Quarter in Detail
On a Base Business basis (non-GAAP basis), earnings came in at 77 cents per share, up 7% from the prior-year period. The bottom line surpassed the Zacks Consensus Estimate of 75 cents.
Net sales of $4,822 million increased 7.5% from the year-ago quarter and beat the Zacks Consensus Estimate of $4,671 million. On an organic basis, the company’s sales advanced by 8%, with improvements in all divisions and categories.
Total volumes declined 3% on an organic basis, while pricing was up 11%. The unfavorable currency impact in the quarter was 2%.
Gross profit of $2,787 million increased by 9.1% year over year. The gross profit margin expanded 80 basis points (bps) to 57.8% on both GAAP and an adjusted basis. This includes an adverse impact of 70 bps from private-label sales resulting from the previously disclosed acquisitions of pet food businesses. We had expected a gross profit margin of 57.1% for the quarter under discussion.
Management also highlighted that the improvement in the gross profit margin was driven by continued strong pricing and the benefits of funding growth and other productivity initiatives. The company expects to witness top- and bottom-line growth with gross profit margin expansion for the rest of the year.
Selling, general & administrative (SG&A) expenses grew 6.7% year over year to $1,768 million. As a percentage of net sales, SG&A expenses contracted 30 bps year over year to 36.6%, which is compared with our estimate of 36.4%.
Colgate’s global market share in the manual toothbrushes category has reached 30.4% year to date. The company has maintained its leadership position in the global toothpaste market, with a market share of 40.5% year to date.
Colgate-Palmolive Company Price, Consensus and EPS Surprise
North America’s net sales (20% of total sales) rose 1.5% year over year. The segment gained from a 9% increase in pricing, offset by a 7% decline in volume and 0.5% currency headwinds. Organic sales growth in home care and personal care was partly offset by organic sales declines in oral care. Year-to-date, Colgate’s share in the toothpaste and manual toothbrush markets is 33.9% and 41%, respectively, in the United States.
Latin America’s net sales (24% of total sales) advanced 15.5% year over year on 15.5% pricing gains and a 0.5% increase in volume. Sales growth was partly offset by a 0.5% negative currency impact. On an organic basis, sales were up 16%, led by growth in Mexico, Argentina, Brazil and Colombia.
Europe’s net sales (14% of the total sales) increased 6% year over year on a reported basis. The segment was driven by a 12% pricing gain and a 0.5% favorable currency impact, partly offset by a 6.5% decrease in volume. Organic sales were up 5.5%, driven by Germany and the United Kingdom.
The Asia Pacific segment’s net sales (14% of the total sales) decreased 4.5% year over year, reflecting a 4.5% decline in volumes and a 5.5% impact of adverse currency, partly offset by a 5.5% rise in pricing. Organic sales improved 1%, driven by gains in India, Australia and the Philippines, partly offset by weakness in the Greater China region.
Africa/Eurasia’s net sales (6% of the total sales) improved 4.5% year over year, driven by a 10.5% increase in volume and 10% growth in pricing, partly offset by a 16% unfavorable currency impact. Organic sales for the segment grew 20.5%, driven by growth in Turkiye and South Africa.
Hill’s Pet Nutrition’s net sales (22% of the total sales) improved 16% from the year-ago quarter on a reported basis and 10.5% on an organic basis. Results gained from a 13.5% increase in pricing and volume growth of 4% on a reported basis, partly offset by a 3% decline in organic volume and a 1.5% adverse currency impact. Organic sales were aided by gains in the United States and Europe, partly offset by softness in Australia.
Other Financial Details
Colgate-Palmolive ended the quarter with cash and cash equivalents of $819 million and total debt of $8,989 million. Net cash provided by operating activities was $1,457 million for the six-month period ended Jun 30, 2023. Free cash flow before dividends was $1,110 million.
Outlook
Management raised its sales and profit forecast for 2023. Colgate-Palmolive now anticipates net sales growth of 5-8% compared with its prior estimate range of 3-6%. The current projection reflects gains from the acquisitions of pet food businesses, offset by a low-single-digit adverse currency impact. It currently anticipates full-year organic sales growth between 5% and 7% compared with its earlier forecast of 4%-6%.
The company still foresees adjusted gross profit margin expansion and increased advertising investment. Management expects adjusted earnings per share to increase at the high end of mid-single-digits compared with its prior expectation of a mid-single-digit growth.
Shares of this Zacks Rank #2 (Buy) company have declined 4.4% in the past three months compared with the industry’s decline of 3.2%.
LW has a trailing four-quarter earnings surprise of 44.8%, on average. The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 27.2% and 8.1%, respectively, from the corresponding year-ago reported figures.
Post Holdings, a consumer-packaged goods holding company, currently has a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 46.7%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings suggests growth of 13% and 141.1%, respectively, from the corresponding year-ago reported figures.
Church & Dwight, a provider of household, personal care and specialty products, currently carries a Zacks Rank #2. CHD has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Church & Dwight’s current fiscal-year sales and earnings suggests growth of 7.4% and 4.7%, respectively, from the corresponding year-ago reported figures.
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Colgate (CL) Q2 Earnings & Sales Surpass Estimates, View Up
Colgate-Palmolive Company (CL - Free Report) reported second-quarter 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. In the quarter, the company’s sales and earnings per share improved on a year-over-year basis. Colgate-Palmolive registered growth in all divisions and all four categories. The company raised its organic sales view for the full year.
Quarter in Detail
On a Base Business basis (non-GAAP basis), earnings came in at 77 cents per share, up 7% from the prior-year period. The bottom line surpassed the Zacks Consensus Estimate of 75 cents.
Net sales of $4,822 million increased 7.5% from the year-ago quarter and beat the Zacks Consensus Estimate of $4,671 million. On an organic basis, the company’s sales advanced by 8%, with improvements in all divisions and categories.
Total volumes declined 3% on an organic basis, while pricing was up 11%. The unfavorable currency impact in the quarter was 2%.
Gross profit of $2,787 million increased by 9.1% year over year. The gross profit margin expanded 80 basis points (bps) to 57.8% on both GAAP and an adjusted basis. This includes an adverse impact of 70 bps from private-label sales resulting from the previously disclosed acquisitions of pet food businesses. We had expected a gross profit margin of 57.1% for the quarter under discussion.
Management also highlighted that the improvement in the gross profit margin was driven by continued strong pricing and the benefits of funding growth and other productivity initiatives. The company expects to witness top- and bottom-line growth with gross profit margin expansion for the rest of the year.
Selling, general & administrative (SG&A) expenses grew 6.7% year over year to $1,768 million. As a percentage of net sales, SG&A expenses contracted 30 bps year over year to 36.6%, which is compared with our estimate of 36.4%.
Colgate’s global market share in the manual toothbrushes category has reached 30.4% year to date. The company has maintained its leadership position in the global toothpaste market, with a market share of 40.5% year to date.
Colgate-Palmolive Company Price, Consensus and EPS Surprise
Colgate-Palmolive Company price-consensus-eps-surprise-chart | Colgate-Palmolive Company Quote
Segment Discussion
North America’s net sales (20% of total sales) rose 1.5% year over year. The segment gained from a 9% increase in pricing, offset by a 7% decline in volume and 0.5% currency headwinds. Organic sales growth in home care and personal care was partly offset by organic sales declines in oral care. Year-to-date, Colgate’s share in the toothpaste and manual toothbrush markets is 33.9% and 41%, respectively, in the United States.
Latin America’s net sales (24% of total sales) advanced 15.5% year over year on 15.5% pricing gains and a 0.5% increase in volume. Sales growth was partly offset by a 0.5% negative currency impact. On an organic basis, sales were up 16%, led by growth in Mexico, Argentina, Brazil and Colombia.
Europe’s net sales (14% of the total sales) increased 6% year over year on a reported basis. The segment was driven by a 12% pricing gain and a 0.5% favorable currency impact, partly offset by a 6.5% decrease in volume. Organic sales were up 5.5%, driven by Germany and the United Kingdom.
The Asia Pacific segment’s net sales (14% of the total sales) decreased 4.5% year over year, reflecting a 4.5% decline in volumes and a 5.5% impact of adverse currency, partly offset by a 5.5% rise in pricing. Organic sales improved 1%, driven by gains in India, Australia and the Philippines, partly offset by weakness in the Greater China region.
Africa/Eurasia’s net sales (6% of the total sales) improved 4.5% year over year, driven by a 10.5% increase in volume and 10% growth in pricing, partly offset by a 16% unfavorable currency impact. Organic sales for the segment grew 20.5%, driven by growth in Turkiye and South Africa.
Hill’s Pet Nutrition’s net sales (22% of the total sales) improved 16% from the year-ago quarter on a reported basis and 10.5% on an organic basis. Results gained from a 13.5% increase in pricing and volume growth of 4% on a reported basis, partly offset by a 3% decline in organic volume and a 1.5% adverse currency impact. Organic sales were aided by gains in the United States and Europe, partly offset by softness in Australia.
Other Financial Details
Colgate-Palmolive ended the quarter with cash and cash equivalents of $819 million and total debt of $8,989 million. Net cash provided by operating activities was $1,457 million for the six-month period ended Jun 30, 2023. Free cash flow before dividends was $1,110 million.
Outlook
Management raised its sales and profit forecast for 2023. Colgate-Palmolive now anticipates net sales growth of 5-8% compared with its prior estimate range of 3-6%. The current projection reflects gains from the acquisitions of pet food businesses, offset by a low-single-digit adverse currency impact. It currently anticipates full-year organic sales growth between 5% and 7% compared with its earlier forecast of 4%-6%.
The company still foresees adjusted gross profit margin expansion and increased advertising investment. Management expects adjusted earnings per share to increase at the high end of mid-single-digits compared with its prior expectation of a mid-single-digit growth.
Shares of this Zacks Rank #2 (Buy) company have declined 4.4% in the past three months compared with the industry’s decline of 3.2%.
Other Solid Consumer Staple Picks
Some other top-ranked consumer staple stocks are Lamb Weston (LW - Free Report) , Post Holdings (POST - Free Report) and Church & Dwight Co. (CHD - Free Report) .
Lamb Weston, which operates as a frozen potato product company, currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
LW has a trailing four-quarter earnings surprise of 44.8%, on average. The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 27.2% and 8.1%, respectively, from the corresponding year-ago reported figures.
Post Holdings, a consumer-packaged goods holding company, currently has a Zacks Rank #2. POST has a trailing four-quarter earnings surprise of 46.7%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings suggests growth of 13% and 141.1%, respectively, from the corresponding year-ago reported figures.
Church & Dwight, a provider of household, personal care and specialty products, currently carries a Zacks Rank #2. CHD has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Church & Dwight’s current fiscal-year sales and earnings suggests growth of 7.4% and 4.7%, respectively, from the corresponding year-ago reported figures.