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Colgate-Palmolive (CL) Up 7.5% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Colgate-Palmolive Company (CL - Free Report) . Shares have added about 7.5% 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 the most recent earnings report in order to get a better handle on the important drivers.
Colgate Q4 Earnings In Line, Revenues Lag
Colgate-Palmolive posted fourth-quarter 2016 adjusted earnings of $0.75 a share, in line with the Zacks Consensus Estimate but up about 2.7% year over year from $0.73 earned in the prior-year quarter. On a currency-neutral basis, adjusted earnings were up in the high-single digit range.
Including one-time items, the company posted earnings of $0.68 per share, compared with a loss per share of $0.51 in the year-ago quarter.
Deeper Insight
Total sales of $3,721 million declined 4.5% year over year and also missed the Zacks Consensus Estimate of $3,844 million. The benefits of 2.5% increase in prices were more than offset by a negative impact of 1.5% from currency fluctuations and 5.5% drop in global unit volumes. Excluding the effects of the previously announced deconsolidation of its Venezuelan operations, unit volumes dipped 1%.
On an organic basis (excluding foreign exchange, acquisitions, divestitures and the deconsolidated Venezuelan operations), the company recorded sales growth of 1.5% on the back of 4.5% growth in organic sales in emerging markets despite tough economic conditions.
Adjusted gross profit margin was 60.8%, up 180 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 packaging and material expenses stemming from higher currency translation costs and the effect of deconsolidation of the Venezuelan operations.
In the reported quarter, adjusted operating profit of $1,038 million increased 2%, with the adjusted operating margin improving 190 bps to 27.9% on enhanced gross margin, partly offset by a 40 bps increase in adjusted selling, general & administrative expenses as a percentage of revenues.
On a year-to-date basis, Colgate’s market share of manual toothbrushes reached 33.1%. Further, the company continued to lead with market share in the global toothpaste with a gain of 44%.
Full-Year 2016 Synopsis
For 2016, the company’s adjusted earnings came at $2.81 per share, flat year over year and in line with the Zacks Consensus Estimate. Revenues for the year dropped 5% to $15,195 million and missed the Zacks Consensus Estimate of $15,340 million.
Q4 Segment Discussion
North America sales (21% of total sales) and organic sales were flat with fourth-quarter 2015, due to flat unit volumes, pricing and effects of foreign exchange.
Latin America sales (24% of total sales) slumped 10.5% year over year as the benefits of 9% increase in pricing were more than offset by 16.5% plunge in unit volumes and negative impact of 3% from foreign exchange. Excluding the deconsolidation of Venezuelan operations’ impact, unit volumes inched up 1.5%, driven by gains in Mexico. On an organic basis, sales rose 10.5%.
Europe (16% of total sales) sales slipped 7.5% year over year, owing to 2% decline in unit volumes, 1.5% lower pricing and 4% impact from currency translations. Unit volumes gains in the U.K. were more than offset by declines in France. Europe organic sales dipped 3.5%.
Asia Pacific sales (18% of total sales) declined 4%, attributable to a 2% negative impact currency headwinds and 2% fall in prices. Unit volumes remained flat year over year as volume declines in India due to demonetization, negated by growth in Philippines and Greater China. On an organic basis, sales declined 2%.
Africa/Eurasia sales (6% of total sales) fell 1.5% year over year, fueled by a 10% jump in pricing and positive currency effects of 0.5%, neutralized by 12% drop in unit volumes. Soft volumes at South Africa and the Sub Saharan Africa region were partially compensated by gains in the North Africa/Middle East region. Organic sales for Africa/Eurasia declined 2%.
Hill’s Pet Nutrition sales (15% of total sales) inched up 0.5% year over year. During the quarter, positive impact from 2.5% increase in pricing and 0.5% gain from foreign exchange was somewhat offset by 2.5% drop in unit volume. Unit volume declines in the U.S., Western Europe and Japan could not be compensated by benefits realized in the rest of Asia, Russia, Latin America and South Africa. On an organic basis, sales were flat with the prior-year quarter.
Other Financial Details
Colgate ended the year with cash and cash equivalents of $1,315 million, total debt of $6,533 million, and shareholders’ equity (excluding non-controlling interests) of ($243) million. Net cash provided by operating activities came in at $3,141 million for full-year 2016.
Outlook
Going into 2017, Colgate anticipates the backdrop to remain challenging due to the uncertain global markets and lingering currency headwinds. Hence, it expects net sales for 2017 to improve in low-single digits range. However, the company expects organic sales growth to remain solid backed by its full new product pipeline, appealing marketing programs and strong advertising support.
Excluding charges related to the 2012 Restructuring Program and the other 2016 one-time items, Colgate envisions 2017 earnings per share on a dollar-basis to be about low-single-digits. Further, the company expects strong operating cash flows, gross margin expansion and rise in advertising investment in 2017.
On a GAAP basis, the company anticipates earnings per share on a dollar basis to be flat with 2016, with gross margins expected to expand year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted 6.28% downward due to these changes.
At this time, Colgate-Palmolive's stock has a nice Growth Score of 'B', though it is lagging a bit 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 aggregte VGM Score of 'D'. 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
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.
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Colgate-Palmolive (CL) Up 7.5% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Colgate-Palmolive Company (CL - Free Report) . Shares have added about 7.5% 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 the most recent earnings report in order to get a better handle on the important drivers.
Colgate Q4 Earnings In Line, Revenues Lag
Colgate-Palmolive posted fourth-quarter 2016 adjusted earnings of $0.75 a share, in line with the Zacks Consensus Estimate but up about 2.7% year over year from $0.73 earned in the prior-year quarter. On a currency-neutral basis, adjusted earnings were up in the high-single digit range.
Including one-time items, the company posted earnings of $0.68 per share, compared with a loss per share of $0.51 in the year-ago quarter.
Deeper Insight
Total sales of $3,721 million declined 4.5% year over year and also missed the Zacks Consensus Estimate of $3,844 million. The benefits of 2.5% increase in prices were more than offset by a negative impact of 1.5% from currency fluctuations and 5.5% drop in global unit volumes. Excluding the effects of the previously announced deconsolidation of its Venezuelan operations, unit volumes dipped 1%.
On an organic basis (excluding foreign exchange, acquisitions, divestitures and the deconsolidated Venezuelan operations), the company recorded sales growth of 1.5% on the back of 4.5% growth in organic sales in emerging markets despite tough economic conditions.
Adjusted gross profit margin was 60.8%, up 180 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 packaging and material expenses stemming from higher currency translation costs and the effect of deconsolidation of the Venezuelan operations.
In the reported quarter, adjusted operating profit of $1,038 million increased 2%, with the adjusted operating margin improving 190 bps to 27.9% on enhanced gross margin, partly offset by a 40 bps increase in adjusted selling, general & administrative expenses as a percentage of revenues.
On a year-to-date basis, Colgate’s market share of manual toothbrushes reached 33.1%. Further, the company continued to lead with market share in the global toothpaste with a gain of 44%.
Full-Year 2016 Synopsis
For 2016, the company’s adjusted earnings came at $2.81 per share, flat year over year and in line with the Zacks Consensus Estimate. Revenues for the year dropped 5% to $15,195 million and missed the Zacks Consensus Estimate of $15,340 million.
Q4 Segment Discussion
North America sales (21% of total sales) and organic sales were flat with fourth-quarter 2015, due to flat unit volumes, pricing and effects of foreign exchange.
Latin America sales (24% of total sales) slumped 10.5% year over year as the benefits of 9% increase in pricing were more than offset by 16.5% plunge in unit volumes and negative impact of 3% from foreign exchange. Excluding the deconsolidation of Venezuelan operations’ impact, unit volumes inched up 1.5%, driven by gains in Mexico. On an organic basis, sales rose 10.5%.
Europe (16% of total sales) sales slipped 7.5% year over year, owing to 2% decline in unit volumes, 1.5% lower pricing and 4% impact from currency translations. Unit volumes gains in the U.K. were more than offset by declines in France. Europe organic sales dipped 3.5%.
Asia Pacific sales (18% of total sales) declined 4%, attributable to a 2% negative impact currency headwinds and 2% fall in prices. Unit volumes remained flat year over year as volume declines in India due to demonetization, negated by growth in Philippines and Greater China. On an organic basis, sales declined 2%.
Africa/Eurasia sales (6% of total sales) fell 1.5% year over year, fueled by a 10% jump in pricing and positive currency effects of 0.5%, neutralized by 12% drop in unit volumes. Soft volumes at South Africa and the Sub Saharan Africa region were partially compensated by gains in the North Africa/Middle East region. Organic sales for Africa/Eurasia declined 2%.
Hill’s Pet Nutrition sales (15% of total sales) inched up 0.5% year over year. During the quarter, positive impact from 2.5% increase in pricing and 0.5% gain from foreign exchange was somewhat offset by 2.5% drop in unit volume. Unit volume declines in the U.S., Western Europe and Japan could not be compensated by benefits realized in the rest of Asia, Russia, Latin America and South Africa. On an organic basis, sales were flat with the prior-year quarter.
Other Financial Details
Colgate ended the year with cash and cash equivalents of $1,315 million, total debt of $6,533 million, and shareholders’ equity (excluding non-controlling interests) of ($243) million. Net cash provided by operating activities came in at $3,141 million for full-year 2016.
Outlook
Going into 2017, Colgate anticipates the backdrop to remain challenging due to the uncertain global markets and lingering currency headwinds. Hence, it expects net sales for 2017 to improve in low-single digits range. However, the company expects organic sales growth to remain solid backed by its full new product pipeline, appealing marketing programs and strong advertising support.
Excluding charges related to the 2012 Restructuring Program and the other 2016 one-time items, Colgate envisions 2017 earnings per share on a dollar-basis to be about low-single-digits. Further, the company expects strong operating cash flows, gross margin expansion and rise in advertising investment in 2017.
On a GAAP basis, the company anticipates earnings per share on a dollar basis to be flat with 2016, with gross margins expected to expand year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been six revisions lower for the current quarter. In the past month, the consensus estimate has shifted 6.28% downward due to these changes.
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 nice Growth Score of 'B', though it is lagging a bit 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 aggregte VGM Score of 'D'. 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
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.