What Could Drive Colgate-Palmolive’s EPS in 2018?



Recent past and near future

As shown in the graph below, Colgate-Palmolive (CL) managed to improve its earnings in 2017, after witnessing weakness for a couple of years. Cost savings, a lower outstanding share count, and currency rates helped offset higher input costs, soft volumes, and lower net prices.

Colgate-Palmolive expects to maintain its growth momentum this year, forecasting its EPS to grow ~10% YoY (year-over-year). Analysts also expect Colgate-Palmolive’s bottom line to grow ~10% YoY.

Factors that could drive CL’s EPS

This year, Colgate-Palmolive’s bottom line is expected to benefit from a lower effective tax rate and improved volumes and cost savings from the company’s Funding the Growth program. The company expects to take pricing action in future quarters, which is expected to offset raw material cost inflation. However, increased competition, higher transportation costs, and higher advertising investments are expected to hurt Colgate-Palmolive’s earnings growth.

In comparison, analysts expect peers Kimberly-Clark (KMB), Procter & Gamble (PG), and Clorox (CLX) to see YoY earnings growth due to the tax rate being lowered and cost and productivity measures. However, increased promotional spending to drive volumes and higher raw material, packaging, and transportation costs are expected to remain a drag.

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