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Could Colgate-Palmolive’s 2Q17 EPS Improve?

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EPS trend

Colgate-Palmolive (CL) is scheduled to report its 2Q17 results on Friday, July 21, 2017. Wall Street expects the company to report adjusted EPS (earnings per share) of $0.72, reflecting a YoY (year-over-year) rise of 2.9% compared to 2Q16. The company exceeded analysts’ estimates in 1Q17 and 2Q16 and met their consensus estimates in 3Q16 and 4Q16.

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Recent past, near future

In 1Q17, Colgate-Palmolive exceeded analysts’ estimate despite soft sales. The company’s bottom line improved 6.3% YoY, driven by cost- and productivity-saving measures and lower taxes. Price restructuring also benefited its profitability.

Consumer product companies are witnessing lower demand for their products. Inventory destocking from retailers due to soft consumer uptake and category slowdowns in developed markets, mainly the United States (SPY) (SPX-INDEX), is negatively impacting their top-line performances.

Given the soft sales environment, Colgate-Palmolive is relying on productivity- and cost-cutting measures to accelerate its bottom-line growth. Its peers, including Procter & Gamble (PG) and Kimberly-Clark (KMB), are also focusing on reducing costs to drive profitability. However, Clorox (CLX) and Church & Dwight (CHD) continue to defy the current industry trend by generating substantial volumes. That, in turn, is boosting EPS growth.

As for Colgate-Palmolive, its EPS in 2Q17 is likely to benefit from lower costs and productivity savings stemming from its Funding the Growth initiative. But soft volume trends due to moderating category growth and currency headwinds will continue to remain a drag on the company.

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