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Why Colgate-Palmolive’s EPS Could Continue to Fall in Q4

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Jan. 22 2019, Updated 11:05 a.m. ET

Analysts expect CL’s earnings to fall

Analysts expect the weakness in Colgate-Palmolive’s (CL) bottom line to continue in the fourth quarter. They expect Colgate-Palmolive to post adjusted EPS of $0.73, indicating a YoY (year-over-year) fall of 2.7%.

Colgate-Palmolive’s bottom line is expected to take a hit from continued weakness in its top line. Meanwhile, sluggish margins are likely to further pressure its earnings.

The graph above shows that Colgate-Palmolive’s bottom line fell in the third quarter. Meanwhile, analysts expect the company’s earnings to remain weak—at least until the first half of 2019.

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Colgate-Palmolive’s profit margins could continue to slide during the fourth quarter. Its management expects inflation in the cost of raw and packing materials to continue to pressure its margins and, in turn, its EPS. However, higher pricing and cost savings are likely to support its margins and earnings. A decline in the effective tax rate is also expected to cushion its fourth-quarter earnings.

Peers to report improved EPS

The earnings of the company’s peers are also expected to take a hit from higher cost pressures on their margins and top line headwinds. However, a lower effective tax rate and productivity and cost savings are likely to support their earnings growth rates.

Analysts expect Procter & Gamble (PG), Kimberly-Clark (KMB), the Clorox Company (CLX), and Church & Dwight’s (CHD) quarterly EPS to mark YoY improvements. However, sales and margin headwinds are expected to restrict their bottom line growth rates.

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