Colgate-Palmolive (CL) reported better-than-expected fourth-quarter results on Friday, January 25. The company’s top and bottom lines declined on a YoY (year-over-year) basis. However, both sales and earnings were better than analysts’ expectations.
Higher pricing and a lower effective tax rate supported the company’s financials during the fourth quarter. Meanwhile, organic sales improved. However, currency volatility remained a drag and lowered sales. Meanwhile, higher raw material and packaging costs, coupled with an increase in advertising investments, subdued earnings.
Management expects innovation, premium products, and higher pricing to support organic sales growth in 2019. However, earnings are projected to decline, which could restrict the upside in the stock. We expect ongoing headwinds from currency volatility and higher raw and packaging material costs to take a toll on its top- and bottom-line growth. Meanwhile, the adjusted effective tax rate is expected to remain higher than in 2018, which is likely to suppress earnings.
Following the company’s fourth-quarter results, multiple analysts lowered their price targets on Colgate-Palmolive stock, which implies that the near-term sales and margin headwinds are likely to hurt the stock.