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Could Colgate-Palmolive Exceed Its 3Q17 Earnings Estimate?

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Analysts’ consensus estimate

Colgate-Palmolive (CL) is set to announce its 3Q17 earnings on Friday, October 27, 2017. Wall Street expects the company’s adjusted EPS (earnings per share) to remain flat at $0.73. They expect profitability to benefit from improved performance in emerging markets. Cost reductions could further support EPS growth. However, continued sluggishness in developed regions, especially North America, is projected to offset the positives.

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In comparison, analysts expect Procter & Gamble (PG) and Kimberly-Clark (KMB) to report better EPS in their upcoming quarters. They expect Procter & Gamble to have EPS growth of 3.9% in its upcoming fiscal 1Q18 earnings on October 20, 2017. Kimberly-Clark’s 3Q17 EPS is expected to rise 1.3% on a YoY (year-over-year) basis.

Clorox’s (CLX) and Church & Dwight’s (CHD) bottom lines are expected to benefit from strong sales.

Factors that could impact EPS

Colgate-Palmolive’s management expects its bottom line to grow in the low single digits in 2017, driven by higher cost reduction and productivity savings. However, higher raw material and advertising costs and a continued softness in the United States (SPY) could affect its profitability growth rate. Colgate-Palmolive’s bottom line was adversely impacted by lower volumes and currency headwinds. Challenges in key markets such as India also hampered its sales and, in turn, its EPS.

However, the negative impact of currency movements is likely to subside, which should help the company’s bottom line. Its pricing action, market-leading position in the toothpaste category, and strong performance in Latin America could further cushion its EPS. The market condition in India is expected to remain volatile after the rollout of GST (Goods and Services Tax) and demonetization, which could hurt its financials.

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