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Colgate-Palmolive Beats Estimates, but Stock Falls

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Key takeaways

Despite reporting better-than-expected fourth-quarter results today, Colgate-Palmolive (CL) saw its stock fell as the company’s top and bottom lines decreased YoY (year-over-year). Colgate-Palmolive’s net sales fell YoY as benefits from higher pricing were more than offset by currency volatility and weak volumes. However, its organic sales increased thanks to higher pricing.

Colgate-Palmolive’s margins were weak, pressured by continued raw and packaging material cost inflation. Meanwhile, increased logistics costs and higher advertising investments subdued its operating margins, and in turn, its EPS. Although Colgate-Palmolive’s EPS beat analysts’ expectation, they fell YoY due to lower volumes and narrower margins.

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In comparison, Procter & Gamble (PG) posted better-than-expected fiscal 2019 second-quarter results on January 23. Higher pricing, a favorable mix, share repurchases, and a lower effective tax rate drove the company’s organic sales and earnings. Meanwhile, Kimberly-Clark’s (KMB) fourth-quarter sales fell YoY but beat analysts’ estimate. The company’s earnings missed analysts’ expectation as commodity inflation suppressed its margins and EPS.

Fourth-quarter financials

Colgate-Palmolive’s fourth-quarter net sales of $3.8 billion beat analysts’ estimate but fell 2% YoY. Currency volatility impacted its net sales by 5%, and its volumes fell 0.5%. However, its pricing improved by 2.5%, and its organic sales rose 2%.

Colgate-Palmolive’s adjusted gross margin narrowed by 100 basis points. That narrowing, combined with higher selling, general, and administrative expenses, resulted in its adjusted operating margin contracting by 210 basis points. The company’s adjusted EPS fell 1% YoY to $0.74, beating analysts’ expectation of $0.73.

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