Colgate (CL) Q4 Earnings & Sales Beat Estimates, '24 View Issued
Colgate-Palmolive Company CL reported fourth-quarter 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. Results benefited from strong top-line growth, improved organic volume performance, and gross and operating profit margin expansion.
On a Base Business basis (non-GAAP basis), earnings were 87 cents per share, up 13% from the prior-year period. The bottom line surpassed the Zacks Consensus Estimate of 85 cents.
Net sales of $4,950 million increased 7% from the year-ago quarter and beat the Zacks Consensus Estimate of $4,898 million. On an organic basis, too, the company’s sales advanced 7%. Total volumes were flat on an organic and reported basis, while pricing was up 7%. Currency had a neutral impact on sales in the quarter.
We estimated organic sales growth of 4.6% for the fourth quarter, with a 7.9% rise in pricing and a 3.3% decline in volume.
Colgate-Palmolive Company Price, Consensus and EPS Surprise
Colgate-Palmolive Company price-consensus-eps-surprise-chart | Colgate-Palmolive Company Quote
Gross profit of $2,950 million increased 14.6% year over year. The gross profit margin expanded 400 basis points (bps) to 59.6% on both GAAP and adjusted basis. We had expected gross margin expansion of 170 bps to 57.3% for the fourth quarter.
Selling, general and administrative (SG&A) expenses grew 10.4% year over year to $1,803 million. As a percentage of net sales, SG&A expenses expanded 110 bps year over year to 36.4%. We had predicted SG&A expenses, as a percentage of revenues, to expand 50 bps to 35.8%.
Colgate’s global market share in the manual toothbrushes category has reached 31.5% year to date. The company has maintained its leadership position in the global toothpaste market, with a market share of 41.1% year to date.
Shares of this Zacks Rank #2 (Buy) company have rallied 13.1% in the past three months compared with the industry’s growth of 4.6%.
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Segmental Discussion
North America’s net sales (20% of total sales) rose 3.5% year over year. The segment gained from a 3% increase in pricing and a 0.5% rise in volume. The company’s organic sales also improved 3.5%, driven by growth in oral care and personal care. Year to date, Colgate’s share in the toothpaste and manual toothbrush markets is 33.7% and 41.1%, respectively, in the United States.
Latin America’s net sales (24% of total sales) advanced 18% year over year on 8.5% pricing gains, an 8% increase in volume and a 1.5% favorable currency impact. On an organic basis, sales were up 16.5%, led by growth in Argentina, Mexico, Brazil and Colombia.
Europe’s net sales (14% of the total sales) increased 10% year over year on a reported basis. The segment was driven by a 7.5% pricing gain and a 6.5% favorable currency impact, partly offset by a 4% decrease in volume. Organic sales were up 3.5%, driven by growth in the U.K., the Nordic region and Poland. This was partly offset by organic sales declines in the Filorga business and Italy.
The Asia Pacific segment’s net sales (14% of the total sales) were up 0.5% year over year, reflecting a 4.5% decline in volumes and a 0.5% impact of adverse currency, partly offset by a 5.5% rise in pricing. Organic sales improved 1% due to gains in India and Australia, partly offset by weakness in the Greater China region and Thailand.
Africa/Eurasia’s net sales (5% of the total sales) declined 4% year over year due to a 21% unfavorable currency impact, offset by a 7.5% increase in volume and 9.5% growth in pricing. Organic sales for the segment grew 17%, driven by growth in Turkiye, the Eurasia region, Nigeria and South Africa.
Hill’s Pet Nutrition’s net sales (23% of the total sales) improved 5% from the year-ago quarter on a reported basis and 4.5% on an organic basis. Results gained from an 8.5% increase in pricing and 0.5% positive currency impact, offset by a 4% decline in volume on a reported basis. Organic sales were aided by gains in the United States and Europe.
Other Financial Details
Colgate ended 2023 with cash and cash equivalents of $966 million and total debt of $8,549 million. Net cash provided by operating activities was $3,745 million for the 12-months ended Dec 31, 2023. The free cash flow before dividends was $3,040 million.
Outlook
Management issued its sales and profit forecast for 2024. Colgate anticipates net sales growth of 1-4%, including a low-single-digit negative impact from currency. The company expects organic sales growth to be within its long-term targeted range of 3-5%.
The company foresees gross profit margin expansion and increased advertising investment on both GAAP and adjusted basis. The company expects adjusted earnings per share to grow in the mid to high-single-digits. On a GAAP basis, earnings per share are expected to increase in the double digits.
Other Stocks to Consider
Church & Dwight Co. CHD, which offers a broad range of household, personal care and specialty products, currently carries a Zacks Rank #2. CHD delivered an earnings surprise of 10.1% in the trailing four quarters, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Church & Dwight’s current financial-year sales and earnings suggests growth of 8.9% and 6.4%, respectively, from the year-ago reported numbers.
Inter Parfums IPAR, a wide range of fragrances and related products, currently carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 45.7%, on average.
The Zacks Consensus Estimate for Inter Parfums’ current fiscal-year sales and earnings suggests growth of 20.9% and 19.9%, respectively, from the year-ago quarter’s reported figures.
e.l.f. Beauty ELF, which operates as a cosmetic company, currently carries a Zacks Rank #2. ELF has a trailing four-quarter earnings surprise of 90.1%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and earnings suggest growth of 58.3% and 63.3%, respectively, from the year-ago reported numbers.
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