Currency and cost headwinds
Colgate-Palmolive’s (CL) adjusted earnings remained weak in the past three quarters. The company beat analysts’ EPS expectation during the last reported quarter due to improved organic sales, cost-savings, and a lower effective tax rate. However, the adjusted EPS marked a high-single-digit decline.
We expect persisting margin headwinds and currency volatility to continue to hurt Colgate-Palmolive’s earnings in 2019. Inflation in packaging and raw material costs will likely offset the benefits from higher pricing and cost-savings and drag the company’s margins and EPS down. Negative currency rates and increased advertising investments could pressure the company’s earnings.
Higher input and logistics costs, negative currency rates, the higher effective tax rate, and a more competitive environment are impacting other significant household and personal care product manufacturers’ bottom lines. Kimberly-Clark’s (KMB) bottom line fell during the last reported quarter, which reflected a higher effective tax rate and cost headwinds. Procter & Gamble (PG), Church & Dwight (CHD), and Clorox (CLX) posted an improved adjusted EPS. However, lower margins remained a drag.
Analysts expect Colgate-Palmolive’s adjusted earnings to fall 6% in the second quarter. The fiscal EPS is projected to mark a mid-single-digit decline. Higher raw material and packaging costs, planned investments in advertising, and little or no benefits from the tax rate are expected to hurt Colgate-Palmolive’s bottom line.