Colgate-Palmolive Company (CL Quick QuoteCL - Free Report) shares have appreciated 13.1% in the trailing 12 months, outperforming the Zacks Consumer Products – Staples industry’s rise of 6% and the broader Zacks Consumer Staples sector’s return of 0.2%.

CL Stock's Past One Year Performance

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The upswing in the past year was largely driven by strong pricing, and funding-the-growth and other productivity initiatives. This, along with solid business momentum, led to a robust performance in third-quarter 2024.

CL Stock Rides on Strong Pricing & Premium Innovation

A key driver of Colgate's strong performance has been its continued focus on pricing strategies and productivity initiatives. Aggressive pricing actions in the past few quarters have supported margin expansion, with adjusted gross margin rising to 61.3% and adjusted operating profit margin increasing to 21.5% in the third quarter of 2024.

The company achieved year-over-year earnings per share growth, driven by higher gross margins and improved pricing, which rose across all divisions except North America. Colgate’s organic sales growth was further bolstered by increased volume and pricing, with every operating division reporting volume growth for the second consecutive quarter.

Colgate's strategy of combining core and premium innovation with increased advertising investment and enhanced capabilities is driving its brand strength and expanding household penetration. A significant focus on the premiumization of its Oral Care portfolio has resulted in the successful launch of innovative products such as CO. by Colgate, Colgate Elixir toothpaste and Colgate enzyme whitening toothpaste, all of which have performed exceptionally well.

CL’s Upbeat Outlook

Management forecasts gross profit margin expansion on both a GAAP and adjusted basis, driven by continued pricing gains, benefits from revenue-growth management initiatives and strength in the funding-the-growth program. CL expects the Base Business’s EPS to increase 10-11% in 2024. On a GAAP basis, EPS is expected to rise by double digits.

Colgate anticipates net sales growth of 3-5%. This indicates a higher organic sales view, offset by the negative impacts of currency translations. The company expects organic sales growth of 7-8% for 2024. It retained the guidance of a mid-single-digit negative impact of currency.

Revised Estimates Signal Strength in CL Stock

Reflecting the positive sentiment, the Zacks Consensus Estimate for CL’s fiscal 2024 earnings has been unchanged in the past 30 days.

For 2024, the Zacks Consensus Estimate for CL’s sales and EPS implies 3.9% and 11.2% year-over-year growth, respectively. The consensus mark for 2025 sales and earnings indicates 3.1% and 6.7% year-over-year increases, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Pressures Weighing on CL Stock

Colgate has been grappling with significant challenges, including macroeconomic instability and foreign currency headwinds. Persistent inflation in raw materials and packaging costs has negatively impacted profitability, while lower private-label volumes also weighed on results in the third quarter of 2024.

North America’s net sales dipped 1.9% year over year on an organic basis. The sales decline was led by a 3.2% decrease in pricing, offset by a 1.2% increase in volume. The decline in pricing was led by a continued shift toward mid-tier products and channels, along with increased couponing and higher redemption rates across the CPG industry. Also, Latin America’s net sales fell 3.2% year over year, owing to unfavorable currency impacts.

Overall, foreign currency fluctuations reduced total sales growth by 4.4% in the third quarter, with significant effects from Argentina and various countries in the Africa/Eurasia division. Excluding Argentina, currency effects still contributed a low-single-digit adverse impact, and the company’s full-year 2024 sales outlook anticipates a mid-single-digit negative impact from currency.

Final Thought on CL Stock

CL’s robust pricing strategies, productivity initiatives and innovations are key drivers that make the stock attractive for long-term investors. Hence, investors who own the stock may expect the company's growth prospects to be rewarding over the long term.

Continuing weakness with challenges like macroeconomic instability and foreign currency headwinds acts as a deterrent. Current investors should retain their positions in CL stock, while new investors might wait for a more favorable entry point. Colgate currently carries a Zacks Rank #3 (Hold).

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