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Colgate-Palmolive sinks after revenues miss estimates

Colgate-Palmolive Company’s (CL) shares dropped over 5.7% during pre-market hours on Friday after the company, despite meeting earnings expectations, missed the mark on revenues for the third quarter of 2018.

Sales dropped 3% to $3.84 billion compared to the same period last year, while organic sales dropped 0.5%. Global unit volume remained flat with the prior-year quarter while pricing rose 1%. The professional skin care acquisitions contributed 1.5% to net sales and unit volume.

Colgate-Palmolive third quarter 2018 Earnings Infographic
Colgate-Palmolive Q3 2018 Earnings Infographic

Net income was $523 million, or $0.60 per share, compared to $607 million, or $0.68 per share, in the prior-year period. Reported net income included after-tax charges from the Global Growth and Efficiency Program as well as charges associated with the US tax reform.

Adjusted net income was $625 million, or $0.72 per share, reflecting decreases of 3% and 1% respectively from last year.

The company saw an increase in expenses during the quarter along with soft category growth rates in several markets and unfavorable foreign exchange movements. Profit margins declined compared to the prior-year period.

Colgate-Palmolive posted a sales decrease of 4% in its Oral, Personal and Home Care segment, while the Pet Nutrition segment recorded a sales growth of 1.5%. On a regional basis, barring an increase of 8% in North America, the company saw sales decline across all of its other geographies.

In the toothpaste category, Colgate maintained its leadership position in the US, Latin America, Europe, Asia-Pacific and Africa/Eurasia regions, with the product gaining market share in several countries, including France, Italy, Brazil, Australia, Philippines, Turkey and Saudi Arabia.

The company saw strength in other categories for products such as Softsoap body wash, Axion dish liquid, Sanex shower gels and Cuddly Aroma fabric conditioner. In Hill’s Pet Nutrition, products such as Hill’s Bioactive Recipe and Hill’s Science Diet Perfect Weight contributed to the sales momentum.

Colgate-Palmolive shares dip on Q2 revenue miss

For the fourth quarter of 2018, the company expects a low-single-digit net sales decrease due to foreign exchange and low-single-digit organic sales growth.

For 2018, on a GAAP basis, based on current spot rates and including the impact of the Global Growth and Efficiency Program, Colgate expects lower gross margin and double-digit EPS growth versus 2017.

Excluding charges related to the Global Growth and Efficiency Program and the US tax reform, as well as a benefit from a foreign tax matter in 2018, based on current spot rates, the company is planning for a year of strong operating cash flow, lower gross margin, sustained advertising investment and 3-4% EPS growth versus 2017.


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