Colgate (CL) Earnings Meet Estimates in Q4, Sales Surpass
Colgate-Palmolive Company CL has reported fourth-quarter 2022 results, wherein earnings met the Zacks Consensus Estimate, while sales surpassed the same. Sales and earnings also came ahead of our estimates in the fourth quarter. The top line increased year over year, while earnings per share declined.
Despite challenging macroeconomic conditions, results have gained from the continued positive momentum and sales growth across all divisions. Also, it is on track with its revenue growth management and productivity initiatives via higher investment in innovation, advertising and digital transformation.
Shares of the Zacks Rank #3 (Hold) company have gained 3.2% in the past three months compared with the industry’s growth of 7.3%. However, shares of CL fell more than 3% before the market trading session on Jan 27.
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Quarter in Detail
On a Base Business basis (adjusted non-GAAP), earnings of 77 cents per share declined 3% from the prior-year quarter. Earnings per share were in line with the Zacks Consensus Estimate but came ahead of our estimate of 76 cents. On a GAAP basis, earnings plunged 94% to a penny per share. The bottom line was impacted by assets impairment charges related to the Filorga skin health business.
Net sales of $4,629 million increased 5% from the year-ago quarter and exceeded the Zacks Consensus Estimate of $4,574 million and our estimate of $4,432.5 million. On an organic basis, the company’s sales advanced 8.5%, with improvements in all divisions and categories. This marked the 16th successive quarter of organic sales growth.
Total volumes declined 2.5% on a reported and 4% on an organic basis, and pricing was up 12.5%. The unfavorable currency impact in the quarter was 5%.
The gross profit of $2,574 million inched up 0.6% year over year. However, the gross profit margin contracted 250 basis points (bps) to 55.6%, both on a GAAP and an adjusted basis.
Selling, general & administrative (SG&A) expenses grew 2.2% year over year to $1,633 million. As a percentage of sales, SG&A expenses declined 100 bps year over year to 35.3%.
Colgate’s global market share in the manual toothbrushes category has reached 31.7% year to date. The company has continued with its leadership position in the global toothpaste market, with a market share of 39.8% year to date.
North America’s net sales (21% of total sales) rose 4% year over year. The segment gained from a 10.5% increase in pricing, offset by a 6% decline in volume and 0.5% currency headwinds. Organic sales grew 4.5%, driven by gains in oral care, personal care and home care. Year to date, the company’s share in the toothpaste market is 34.5% and 42.2% in the manual toothbrush market in the United States.
Latin America’s net sales (22% of total sales) advanced 10% year over year on 19% pricing gains. Sales growth was partly offset by a 7% decline in volume and a 2% negative currency impact. On an organic basis, sales were up 12%, led by growth in Brazil, Mexico, Argentina and Colombia.
Europe’s net sales (13% of the total sales) declined 10.5% year over year on a reported basis. The segment was affected by a 6% decrease in volume and an 11.5% negative currency impact, offset by a 7% pricing gain. Organic sales were up 1%, whereas volumes were down 6%. Organic sales were driven by growth in Germany, the U.K., Poland and France, partially offset by a decline in the Filorga business.
The Asia Pacific segment’s net sales (15% of the total sales) dipped 4% year over year, owing to a 1% fall in volumes and a 10% impact of adverse currency, somewhat offset by a 7% increase in pricing. Volumes also declined 1% on an organic basis. Organic sales improved 6%, driven by gains in the Greater China region, Australia and the Philippines.
Africa/Eurasia’s net sales (6% of the total sales) improved 9% year over year, owing to 23.5% growth in pricing, offset by a 7.5% unfavorable currency impact and a 7% decline in volume. Organic sales for the segment grew 16.5%, driven by growth in Turkiye, Nigeria and South Africa.
Hill’s Pet Nutrition’s net sales (23% of the total sales) improved 20% from the year-ago quarter on a reported basis and 14% on an organic basis. Results have gained from a 13.5% increase in pricing, volume growth of 10% on a reported basis and 0.5% on an organic volume basis, partly offset by a 3.5% adverse currency impact. Organic sales were aided by gains in the United States and Europe.
ColgatePalmolive Company Price, Consensus and EPS Surprise
ColgatePalmolive Company price-consensus-eps-surprise-chart | ColgatePalmolive Company Quote
Other Financial Details
Colgate ended fourth-quarter 2022 with cash and cash equivalents of $775 million, and total debt of $8,766 million. Net cash provided by operating activities was $2,556 million as of Dec 31, 2022.
Management has issued 2023 guidance. The company anticipates sales growth of 2-5%, including gains from acquisitions of pet food businesses, offset by a low-single-digit adverse currency impact. Organic sales are expected to be at the high end of its long-term target of 3-5%. Reported gross margin is likely to expand year over year, driven by higher advertising investment and double-digit bottom-line growth. Adjusted gross margin is predicted to benefit from higher advertising investment and low to mid-single digit bottom-line growth.
3 Better-Ranked Consumer Staples Stocks
Here are some better-ranked stocks from the broader Consumer Staples space, namely e.l.f. Beauty ELF, Conagra Brands CAG and Campbell Soup CPB.
e.l.f. Beauty currently sports a Zacks Rank of 1 (Strong Buy). ELF has a trailing four-quarter earnings surprise of 77%, on average. The stock has rallied 29% in the past three months.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggests growth of 17.6% and 8.3%, respectively, from the prior-year reported numbers. The consensus mark for ELF’s earnings per share has moved up a penny in the past seven days.
Conagra Brands, a consumer-packaged goods food company, currently flaunts a Zacks Rank of 1. CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year’s sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2 (Buy). CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the year-ago reported figures.
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