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How Colgate-Palmolive Is Improving Its Earnings

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Improvement in the bottom line

Colgate-Palmolive’s (CL) productivity measures helped it improve its bottom line over the first three quarters of fiscal 2016. In fiscal 2Q16, the company’s adjusted EPS (earnings per share) was flat on a year-over-year basis compared to a 4.5% decline in 1Q16. Improved margins helped the company deliver growth of 1.4% in its 3Q16 adjusted EPS.

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Fiscal 3Q16 earnings

Colgate-Palmolive’s 3Q16 adjusted EPS rose 1.4% on a YoY (year-over-year) basis due to enhanced margins. The company’s 3Q16 adjusted EPS excluded the impact of charges of $0.04 per share associated with its 2012 Restructuring Program and $0.07 per diluted share from an after-tax gain on the sale of land in Mexico. The 3Q16 adjusted EPS also excluded the impact of a net benefit of $0.02 per diluted share arising from a foreign tax matter.

Measures to improve profitability

Colgate-Palmolive is currently focusing on its funding-the-growth initiatives program to effectively utilize its assets and reduce costs. This program includes several initiatives to improve productivity, including reduction of packaging materials and consolidation of suppliers. The company is also seeking higher profitability by investing in higher-margin businesses like oral care, personal care, and pet nutrition.

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Earnings guidance

Analysts expect adjusted EPS growth of 2.7% in fiscal 4Q16. The company’s adjusted EPS is anticipated to remain unchanged at $2.81 for full-year fiscal 2016. Currently, analysts expect the company’s fiscal 2017 adjusted EPS to rise by 7.5% to $3.02.

Comparison with peers

For the comparable quarter, Procter & Gamble (PG), Clorox Company (CLX), and Kimberly-Clark (KMB) are expected to post adjusted EPS growth of 2.9% (fiscal 2Q17), 7.0% (fiscal 2Q17), and 0.0% (fiscal 4Q16), respectively.

We’ll discuss analyst recommendations for Colgate-Palmolive’s stock in the next part of this series.

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