Colgate-Palmolive Company (CL Quick QuoteCL - Free Report) has delivered a solid first-quarter 2026, with Base Business earnings and net sales topping the Zacks Consensus Estimate. Results benefited from balanced pricing and improved volume, supported by a favorable currency backdrop and broad-based growth across most regions. Meanwhile, higher input and logistics costs, and SGPP-related charges pressured reported margins and GAAP profitability.

On a Base Business basis (non-GAAP basis), earnings were 97 cents per share, up 6.6% year over year and beating the Zacks Consensus Estimate of 95 cents by 2.1%.

Net sales of $5.32 billion increased 8.4% from the year-ago quarter and topped the Zacks Consensus Estimate of $5.2 billion by 2.4%. Organic sales rose 2.9% in the quarter, reflecting a 1.1% increase in volume and 2.2% pricing growth, supported by a 5.1% foreign-exchange tailwind.

We estimated organic sales growth of 3.1% for the quarter under review, with a 2.6% rise in pricing and a 0.5% increase in volume.

In the earnings release, management has highlighted that the company has maintained its leadership in the toothpaste market, holding a 41.1% global market share year to date. In addition, Colgate has continued to lead the manual toothbrush market with a 32.6% global market share year to date.

The Zacks Rank #4 (Sell) company's shares have gained 8% in the year-to-date period against the industry’s decline of 1.3%.

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CL’s Margin Picture Reflects Higher Cost Pressures

On a GAAP and Base Business basis, the gross profit margin declined 20 basis points (bps) year over year to 60.6%. Management attributed the compression primarily to a 350-bps impact of higher raw and packaging material and logistics costs, including impacts of tariffs and transactional foreign exchange, which more than offset the 80-bps benefit from pricing and 230-bps gain from productivity initiatives. We expected the adjusted gross margin to contract 20 bps to 60.6%.

Base Business SG&A expenses were $2.07 billion, and as a percentage of sales, increased 60 bps to 38.9%. Advertising spending rose to $734 million from $668 million a year ago, consistent with management’s focus on supporting innovation and demand generation across core categories. We expected the adjusted SG&A expenses, as a percentage of sales, to increase 20 bps at 38.5% for the first quarter.

On a Base Business basis, operating profit increased 4% to $1.13 billion, while Base Business operating margin declined 90 bps to 21.3%. The outcome highlights the company’s ability to protect underlying earnings power through revenue growth management and “funding-the-growth” productivity actions, while still increasing brand investment. We expected the adjusted operating margin to contract 60 bps to 21.6% for the first quarter.

Peek Into CL’s Segmental Discussion

North America’s net sales (16.7% of the total sales) declined 1.8%, reflecting a 2.2% organic sales decrease that was partially offset by a 0.4% foreign-exchange tailwind. Volume fell 3.2% in the quarter, while pricing rose 1%, marking a 60-bps improvement from fourth-quarter 2025.

Latin America (24.7% of the total sales) delivered year-over-year net sales growth of 14.8% and organic sales growth of 5.4%, driven by a balanced mix of volume and pricing. Sales growth was driven 3.4% rise in pricing, a 2% increase in volume and a 9.5% positive currency effect.

Europe, Middle East & Africa (EMEA) (21.1% of the total sales) posted net sales growth of 11.9% with organic sales up 3.5%, reflecting broad-based gains by hub and category. Sales growth was driven by a 1.2% rise in pricing, a 2.2% increase in volume and an 8.5% positive currency effect.

Asia Pacific (15.1% of the total sales) continued to improve, with net sales rising 8.9% and organic sales up 5.6%, supported by a 4.6% volume increase and a 3.3%  benefit from foreign exchange.

Hill’s Pet Nutrition (22.4% of the total sales) grew net sales 6.7% and organic sales 2.1%, with pricing up 3.8%, although results included a negative 2.7% impact of the exit of private-label pet food. Currency provided a 2.7% tailwind to Hill’s net sales in the quarter. Hill’s U.S. delivered mid-single-digit organic sales growth, supported by gains in volume and pricing. Reported volume increased 0.2%, whereas pricing rose 3.8%.

CL’s Cash Flow Improved as Shareholder Returns Continued

Colgate ended first-quarter 2026 with cash and cash equivalents of $1.34 billion, and total debt of $7.97 billion.

Net cash provided by operations was $747 million for the first three months of 2026. The free cash flow before dividends increased to $609 million from $476 million a year ago, reflecting improved cash generation and disciplined working capital management.

In the first quarter, the company paid out $417 million in dividends and repurchased $306 million of shares, returning $0.7 billion to shareholders through buybacks and dividends.

Colgate Maintains 2026 Outlook, Updates Margin View

CL has reiterated its 2026 guidance for net sales growth of 2-6% and organic sales growth of 1-4%, with foreign exchange expected to be a low-single-digit positive contributor at current spot rates. The company continues to expect double-digit GAAP earnings growth and low- to mid-single-digit Base Business earnings growth.

However, management updated its gross profit margin outlook and expects the gross profit margin to be down year over year in 2026 versus the previously stated gross margin expansion, reflecting higher expected inflation in raw and packaging materials, and logistics costs.

The company also expanded its Strategic Growth and Productivity Program, lifting estimated cumulative pretax charges to $350-$550 million, with projected annual pretax savings of $200-$300 million once initiatives are approved and implemented.

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