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Persisting Challenges Could Hurt Colgate-Palmolive in Q1

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What to expect

Colgate-Palmolive (CL) is scheduled to announce its first-quarter earnings results before the market opens on April 26. Analysts’ first-quarter estimates indicate that Colgate-Palmolive’s sales and earnings are likely to remain low.

We expect Colgate-Palmolive’s organic sales to improve on the back of higher pricing. However, currency volatility and heightened competition are likely to more than offset the benefits of this higher pricing and drag its net sales down.

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Top line weakness and higher raw materials and packaging costs are expected to hurt Colgate-Palmolive’s profit margins. Colgate-Palmolive’s profit margins are expected to contract in the first quarter.

We expect Colgate-Palmolive’s bottom line to continue to fall in the first quarter of 2019, reflecting adverse currency rates and margin contraction.

Currency volatility and higher input and packaging costs are expected to drag down the sales and earnings of other household and personal care product manufacturers, including Kimberly-Clark (KMB) and Procter & Gamble (PG).

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Stock performance

Colgate-Palmolive stock has risen 16.5% so far this year supported by improvements in its organic sales. Higher pricing has also driven the organic sales and stock prices of other major household and personal care product manufacturers.

The stocks of Procter & Gamble, Kimberly-Clark, and Church & Dwight (CHD) have risen 15.4%, 8.4%, and 12.3%, respectively, on a YTD (year-to-date) basis. Meanwhile, the Clorox Company (CLX) stock is trading roughly flat on a YTD basis.

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