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Colgate-Palmolive Beats Estimates on Higher Pricing

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Key takeaways

Colgate-Palmolive (CL) posted better-than-expected first-quarter earnings results on April 26. The company’s top and the bottom lines continued to fall in the quarter, but both its sales and earnings exceeded expectations.

Colgate-Palmolive’s top line fell on a YoY (year-over-year) basis, reflecting adverse currency rates. However, its net sales surpassed analysts’ estimate driven by healthy organic sales. Procter & Gamble (PG) and Kimberly-Clark (KMB) also exceeded analysts’ consensus estimates during their last-reported quarters thanks to their higher organic sales.

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Weak profit margins and adverse currency rates dragged Colgate-Palmolive’s first-quarter earnings down. However, its adjusted EPS came in ahead of analysts’ estimate, reflecting improved organic sales, cost savings, and a slight decline in the adjusted effective tax rate. Procter & Gamble and Kimberly-Clark also exceeded analysts’ estimates on the bottom line front, reflecting cost savings and improved pricing.

First-quarter financials

Colgate-Palmolive reported net sales of $3.88 billion in the first quarter of 2019, implying a YoY fall of 2.9%. However, its net sales came in slightly higher than analysts’ expectation of $3.86 billion. Its organic sales rose 3% driven by a 2% increase in pricing and a 1% rise in volumes.

The company’s adjusted gross margin contracted 110 basis points to 59.2% in the quarter, reflecting continued cost headwinds. Meanwhile, its adjusted operating margin contracted 180 basis points to 23.4%, reflecting a lower gross margin and a higher selling, general, and administrative expense rate.

Colgate-Palmolive posted adjusted EPS of $0.67, which fell 9.5% on a YoY basis but came in ahead of analysts’ estimate of $0.66.

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