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Will Robust Strategies Fuel Colgate's (CL) Q2 Earnings?

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Colgate-Palmolive Company (CL - Free Report) is slated to report second-quarter 2018 results on Jul 27, before the market opens.

Colgate is popular among investors for its meet or beat earnings track record. The company posted in-line earnings in three of the last four quarters, with an average beat of 0.3%.

Colgate-Palmolive Company Price, Consensus and EPS Surprise


Colgate-Palmolive Company Price, Consensus and EPS Surprise | Colgate-Palmolive Company Quote

Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds is whether this consumer goods giant will be able to deliver a positive earnings surprise in the second quarter like the first quarter of 2018. The Zacks Consensus Estimate for the impending quarter is pegged at 77 cents, which reflects year-over-year growth of 6.9%. However, estimates moved south by a penny in the last seven days. The Zacks Consensus Estimate for revenues is $3.97 billion, up 3.7% from the year-ago quarter.

Factors Likely to Influence 2Q18

Colgate is progressing well with its Global Growth and Efficiency Program, which focuses on reducing structural costs to improve gross and operating profits, standardizing processes to improve the decision-making procedure and increasing its market share worldwide. Also, the company is on track with the brand building and productivity maximization initiatives.

In addition to its solid brand portfolio, Colgate remains focused on innovation and in-store implementation to drive growth. This, in turn, has enabled it to capture market share across all regions and categories. With regards to innovation, the company is rolling out the Naturals range in various markets. All these endeavors are likely to boost the upcoming quarterly results.

For 2018, management projects net sales to increase in the mid-single-digit range and organic sales growth in low- to mid-single digit. Also, it anticipates low-double-digit earnings per share growth, on an adjusted basis.

However, Colgate has been witnessing strained margins due to higher raw material and packaging costs. Notably, the company reported second straight quarter of gross margin contraction and fourth consecutive quarter of operating margin decline in first-quarter 2018. Moreover, management expects the backdrop to remain challenging in 2018 due to uncertain global markets and slowing category growth worldwide.

Nevertheless, Colgate anticipates strong cash flow generation, gross margin expansion and higher advertising investments in the current year.

A Glance at Zacks Model

Our proven model does not conclusively show that Colgate is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Colgate has an Earnings ESP of +0.07%. However, the company’s Zacks Rank #4 (Sell) makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Boston Beer Company, Inc. (SAM - Free Report) has an Earnings ESP of +13.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dean Foods Company has an Earnings ESP of +10.35% and a Zacks Rank of 3.

Monster Beverage Corporation (MNST - Free Report) has an Earnings ESP of +1.46% and a Zacks Rank #3.

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