Colgate-Palmolive Company (CL) on Q1 2024 Results - Earnings Call Transcript
Operator: Good morning and welcome to today’s Colgate-Palmolive first quarter 2024 earnings conference call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now for opening remarks, I’d like to turn this call over to Chief Investor Relations Officer and Executive Vice President, M&A, John Faucher. John Faucher: Thanks Betsy. Good morning and welcome to our first quarter 2024 earnings release conference call. This is John Faucher. Today’s conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the first quarter 2024 earnings press release and related prepared materials, and our most recent filings with the SEC including our first quarter 2024 quarterly report on Form 10-Q and subsequent SEC filings, all available on Colgate’s website for a discussion of the factors that could cause actual results to differ materially from these statements. This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables 3, 5 and 6 of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the first quarter 2024 earnings press release and is available on Colgate’s website. Joining me on the call this morning are Noel Wallace, Chairman, President and Chief Executive Officer, and Stan Sutula, Chief Financial Officer. Noel will provide you with some thoughts on our Q1 results and our 2024 outlook, and we will then open it up for Q&A. Noel? Noel Wallace: Thanks John, and hey, good morning everyone, and thanks for joining us to discuss our strong start to 2024. I would like to make two points today on why we think we are well positioned to continue to drive shareholder value through delivering consistent compounded earnings per share growth. The first is the importance of balanced top line growth. You’ve heard me speak over the past several years of our focus on delivering balanced organic sales growth: growth in all of our categories, growth in all of our divisions, and growth in both volume and pricing. That’s we did this quarter - we delivered organic sales growth in all four of our categories, all six of our divisions, and volume and pricing growth on a total company basis. The balance allowed us to deliver on a base business 6% net sales growth on top of 6.5% net sales growth in Q1 2023, despite a nearly 4% headwind from foreign exchange. The focus on balance between pricing and volume growth allowed us to deliver solid volume growth this quarter even with the continued volume softness in China and the expected headwind from lower private label growth as we transferred more Hill’s volume into our pet nutrition manufacturing network. Oral care, personal care and home care each grew volume in the quarter with volume growth of 3% for all three categories combined. Our revamped strategy and increased advertising spending have allowed us to drive growth across a greater percentage of our portfolio, and our focus on core innovation is keeping our biggest brands relevant and vibrant in consumers’ minds. We still have work to do, but our balanced strategy continues to yield results, including continued growth in our global oral care shares, which leads me to my second point, which is flexibility in the P&L. Our focus on revenue growth management and driving our Funding the Growth initiatives enabled us to achieve a 60% gross margin in the quarter, despite significant headwinds from transactional foreign exchange. Our commitment to productivity in the middle of the P&L allowed us to drive 30 basis points of overhead leverage while still continuing to invest in strategic capabilities like digital, data and analytics, all topics we discussed at CAGNY. Prudent balance sheet management allowed us to deliver 18% base business earnings growth despite the year-over-year increase in interest expense and the impact from devaluations around the globe. Most importantly, despite an expected mid-single digit negative impact from foreign exchange, we’re guiding to mid to high single digit base business earnings per share growth, and we’re doing this in the context of meaningful increases in brand investments that will set the stage for growth in the future. This is a testament to the ability of our team to consistently execute our strategy and seize growth opportunities while also preparing to better withstand the inevitable headwinds of running a global business. With that, I’ll take your questions. Operator: We will now begin the question and answer session. [Operator instructions] The first question today comes from Steve Powers from Deutsche Bank. Please go ahead. Steve Powers: Good morning everybody. Good morning Noel, Stan, John. Noel Wallace: Morning. Steve Powers: Really exceptional business performance this quarter, more or less on all fronts; but I wanted to drill down into your organic growth guidance raise for the year. It seems about half of that, a two-point increase is being driven by inflationary pricing as an offset to FX, and fair enough on that. But there also seems to be at least a point beyond that attributable to upside that you’re seeing in real terms across the portfolio, so I’m curious if you could expand on where that upside is coming from versus your prior expectations, and if you’d say more of that is being driven by category growth or it’s more being driven by your own market share momentum. Thank you. Noel Wallace: Great, thanks Steve. I’d come back to the points I made in my upfront comments around balanced organic sales growth - I mean, we’re getting really good quality coming through on the volume line, you saw the 1.3 that was with the headwind of private label that we’re obviously exiting on the Hill’s business, and strong pricing across the board, mid-single digit pricing ex the impact of Argentina. As you point out, we’re seeing nice share growth consistently around the world that’s driving obviously that top line organic growth and the top line sales growth. What we’re most pleased with, I think, is the balance we’re getting both on volume and price. We’re able to still get pricing, not just inflationary pricing but we still have pricing going through the categories, particularly in some of the markets where we’ve had more inflationary impact from raw materials - Hill’s would be a good example of that, we took some more pricing in the first quarter. The pricing has obviously led to good value accretion in the category and it allowed us to drive some value shares. The other important point is we’ve seen really good momentum in our volume shares. The U.S. had good growth in volume share on toothpaste, we’ve seen consistent volume share growth both in Europe and Latin America across our portfolio, so it’s really broad-based across the strategy that we’re trying to execute. Balanced volume, balanced price, good initiatives through the innovation that we’re putting into the market, and then importantly is the continued robust investment. We’re seeing that really pay out in terms of driving not only category growth in the markets where we’re spending, but most importantly allowing us to grow share in the categories where we’re spending money. So overall, I think it’s a reflection of the strategy and a reflection of the balance that we have across both price and volume. Operator: The next question comes from Melanie Schilt with Evercore ISI. Please go ahead. Robert Ottenstein: Robert Ottenstein here. Noel, let’s maybe do a deep dive on oral care. Can you talk a little bit about the market share trends by region, and a little bit more specifically, are you gaining share more from other international players that may have more similar type of products or local players that are maybe more idiosyncratic, and what are the key drivers to the share growth? Is it more the fact that you’re increasing share of voice or are there particular product areas, like whitening, that are really engaging consumers now more than they did in the past? Thank you. Noel Wallace: Yes, thanks Rob. It’s a little bit of all of what you’ve just said. Overall, really pleased with the growth and acceleration of market share globally - you saw that in the prepared remarks, you saw that in some of the slides that we provided, particularly on the whitening segment, and it’s really a function of the strategy that we’ve been executing for the last couple years and really starting to see the fruits of all that effort. The growth is coming obviously from good growth in Europe, which we talked about - we’re at record shares in Europe, and that’s a balance between Colgate and our therapeutic brands of Elmex and Meridol, so good spending behind those businesses, and we’re seeing obviously that translate into good share growth, particularly in some of the big markets across Europe. Likewise, we’re seeing the benefits of that deployed across Africa, where we’ve launched some of those high end therapeutic brands as well. North America, the scanner data has been improving, as you’ve seen, but the shares will continue to be a bit choppy there as we move forward, given some of the strategic changes we’ve taken with some of the drug class of trade on the promotional environment. Latin America had growth in both value and volume that was driven both from, I think, the mix and diversity of our portfolio across Latin America, both at the high end and at the entry price point, given the breadth of portfolio offerings that we have there, and obviously the increased spending that we’re putting behind some of the good innovation. It’s really broad-based - good spending, good innovation across the board, and importantly credit to the teams and their execution on the ground. We see that obviously continuing as we continue to hold investment through the balance of the year, and that share growth is coming from both the multinational competitors as well as local competitors, so broad-based across the board. We’re pleased with where we are. We have more work to do, particularly in North America, but overall good performance. Operator: The next question comes from Peter Grom with UBS. Please go ahead. Peter Grom: Thanks Operator, good morning everyone. Hope you all are doing well. I had a question on the gross margin performance and just kind of how to think about the path from here. We’ve kind of seen this sequential margin progression over the last six quarters or so, but in the prepared remarks, you touched on certain costs will increase as you move through the year, so just any thoughts on how we should think about the gross margin progression from here would be helpful. Then just within that cost savings, any commentary you can share in terms of how we should be thinking about funding the growth, just in the context of a very solid start to the year? Thanks. Noel Wallace: Great, good morning. Thanks. Let me talk more conceptually and strategically, and I’ll let Stan handle some of the more specifics on your question. Overall as we think about the year unfolding, as we’ve talked about, I think, quite consistently, we’ll see pricing start to ladder down as we move through the balance of the year, although we will get inflationary pricing. We still have some pricing that we’re taking in some markets, and I would say we’re deeply pleased with the revenue growth management efforts that we have around the world and what that’s delivering for us in terms of pricing in the market and driving category value. You’ve seen obviously the impact on raw materials in the first quarter - we’ll start to see that elevate a bit more in the back half and obviously the significant impact from transactional due to the foreign exchange headwinds that we face. That being said, we feel very good about the guidance that we’ve provided strategically about growing gross margins in 2024. We’ll get that through obviously funding the growth efforts that we have, good mix in terms of how we’re deploying some of our therapeutic brands around the world, taking pricing where we need to take offset, particularly inflationary and foreign exchange, and obviously very focused on the middle of the P&L, making sure we continue to get leverage there. Overall, strategically we feel good, but we’ll see pricing ladder down and it won’t have as much impact in the year to go as it has had in the first half, but overall we feel good about where we are. Stan? Stan Sutula: Yes, so I’d pick up that. Look, we’re very pleased with the margin performance in Q1, up 310 basis points year-to-year, and improved sequentially. We had a slight benefit from Argentina, but the overall underlying margin improvement was quite good. We’ve guided for margin expansion for the year and we’re confident we can deliver. There’s a couple of headwinds in here, and tailwinds. We talked about the modest raw material inflation, as you’ve heard from others as well. We expect that will slightly escalate as we go through the year. Then, we’ve all watched FX - FX transactional impact has been bouncing around, but that will be a headwind as we go into the year as well. Now in the tailwinds, Noel mentioned earlier, we’ve got great revenue growth management programs in place globally, and we’re seeing the benefit from all of those. We have a proven track record on our Funding the Growth. We had a very good start to Funding the Growth, we’ve got a very good pipeline for Funding the Growth, and the teams, I think have that dialed in as we go forward. Then importantly, we’ve talked about the return to volume growth, and in that we get some scale benefits and leverage as that volume flows through our manufacturing facilities. Overall, we expect to expand margin - you’ll see that on a year-on-year basis. I think as you think sequentially, that will be more modest, but we expand margin for the year and the efforts around RGM and FTG will be able to compensate for the headwinds that we see in FX transactional and raw materials. Operator: The next question comes from Filippo Falorni with Citi. Please go ahead. Filippo Falorni: Hey, good morning everyone. Noel, you mentioned in the prepared remarks for the Hill’s pet food business that you’re expecting sequential volume improvement throughout the year. Maybe can you give us some color of the puts and takes with less impact from private label, volumes in top line, and also just any sense of the contribution from innovation, the expansion into wet pet food, and any color on the trajectory of the business would be helpful. Thank you. Noel Wallace: Sure, good morning Filippo, thank you. As we said in the prepared remarks, really pleased with the performance at Hill’s in the quarter in what’s a pretty tough operating environment. Volume was closer to flat ex the impact of private label, and that was sequentially up, which was good; and we had very good pricing, as we discussed, coming out of the year in 2023 and our need to continue to offset some of the agricultural inflation that we saw in the back half of ’23, moving into ’24. Category volume overall has been a bit sluggish in the category, but I think what’s most important is to see that the sluggishness has been more of a decline in treats and a little bit of conversion from wet to dry, and that’s obviously important for us to think about as we strategically move some of the bigger part of our businesses, which are in the dry segment, going forward. Really importantly, though, is the fact that we generated really strong share growth in the first quarter of the year behind the Hill’s business. We were up across in pet speciality, up in neighborhood pet, penetration continues to grow. We had both share growth in our Science Diet business as well as prescription diet, and I think this is a reflection of the continued strategy that we’re deploying - great innovation, great partnership with pet specialty in terms of driving their categories, and making sure that we have ample advertising to talk about the science-driven nutrition that we provide to the market. Overall, we feel very good about where the Hill’s business is. That business grew high single digits ex the impact of private label, so we feel we’re well positioned, but we’re not immune to some of the sluggishness in the category. But again, as we’ve talked about in the past, we have low brand awareness and low brand penetration, so a lot of upside to continue to go after as we execute our strategy. Stan Sutula: The only thing I’d add there is the investment in capacity has also enabled us to bring in some product that was being co-manufactured before, which improves reliability of delivery and also will improve our margins over time. Noel Wallace: And to your point, Filippo, on wet, obviously there’s some opportunities for us as we’re very low indexed in wet, and particularly in segments like cat where there’s a lot of wet food consumed, we have an opportunity to leverage the new manufacturing we have and get more formulas into the market, and obviously more growth for the business. Operator: The next question comes from Andrea Teixeira with JP Morgan. Please go ahead. Andrea Teixeira : Thank you and good morning. Noel, we spoke to the underlying volume growth in all regions and your revenue growth management definitely sets you apart; but can you comment on how you see the consumer behavior, in particular in the low end consumer in the U.S. and China, which seems to be a concern to some of your peers? You have historically protected your price points in keeping consumers in the category, but would love to see examples that you may highlight by your team in the U.S. and in China and how they’ve been using this portfolio management to barbell between affordability and premiumization. Thank you. Noel Wallace: Yes, I think as we’ve talked about--thanks for the question. The consumer’s been quite constructive. We’ve seen obviously the significant inflation move through the category over the last year. We expected that we would see a return to volume growth as inflation became more benign and as pricing started to stabilize in the categories, and that’s principally what’s happened. Interesting to note that as you take the aggregate of our categories, by and large the categories are still negative, so the volume growth that we had and delivered in the quarter would suggest obviously that we’re growing good volume share. I think that’s a reflection of the broad-based strategy that we’re deploying. One, we have good innovation at the top end of the category, particularly on the therapeutic side, whether that’s in whitening on the premium side, whether that’s the Total Plaque that we’ve launched, whether that’s therapeutic with Meridol and Elmex, as well as a lot of big core innovation. We’ve talked about the fact that a lot of our big core portfolio, particularly in toothpaste, is at that entry or midpriced level, and so we’ve spent a lot of time innovating at the core to ensure that we keep those brands vibrant and we offer consumers real value and real benefits as they come into the category, or they’re trading from mid-price to perhaps entry. You’ve seen some of the sluggishness in China, to your point, come from the rural segment. Clearly that consumer is a bit more challenged in China right now. The premium segment continues to be quite robust, but our Darlie franchise is well positioned longer term, we think, to continue to leverage some of the rural softness that we’re seeing in the category and make sure that we drive share. The Colgate business had a terrific quarter in China, and that’s, I think, a reflection of the move to the premium side of the business as we’ve really gone a lot more onto ecommerce with premium offerings. But overall, we’re seeing, I think, a balanced consumer. The key is making sure that we’re providing the reasons to use our products, and the advertising that we’re executing across the market is very, very important to, one, justify the price increases that came through the category last year, but really to drive trade-up in the categories to ensure consumers see the real value and science-driven benefits of our products in our portfolio. Operator: The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead. Bonnie Herzog: All right, thank you. Good morning everyone. I had a question on your ad spend, which is one of the highest as a percentage of sales among your peers. Noel, you touched on this, but hoping you could talk a little further about your strategy to continue to increase spend, and then ultimately what you believe is the right level of marketing spend moving forward, as well as maybe opportunities to improve ROI. Thank you. Noel Wallace: Yes, thanks Bonnie. I’ll start with the end of your question, which is we’re seeing terrific ROI on the business, and I think that’s translated into the results in the quarter. Obviously good volume growth, certainly above the category, share growth pretty consistently around the world in both value and volume, we’re seeing our premium innovations take share and we’re obviously spending a disproportionate amount of our advertising to drive premiumization and category value. You heard Diana talk at CAGNY about, I think, a lot of the discipline that we’re putting into our media spend, using data and analytics to really justify the spend everywhere we are, drive more personalization and return on that investment. Again, we’re very pleased with the increase in advertising and ultimately what it’s delivering. As I mentioned in my upfront, what’s also terrific for the business right now is the broad-based spending we have on the portfolio. What I mean by that is we’ve moved from exclusively oral care and pet, which was getting a significant amount of spend over the last couple years, to making sure that some of our strong brands around the world are getting their fair share of the advertising, and we’ve seen a great return on that investment. Europe would be a great example of that - we’re spending behind our personal care business in Europe. Sanex is just an extraordinarily strong brand there. The spending behind some of our innovation is driving good share growth and good execution in store, so overall it’s having a pretty systematic impact on the business and we’re pleased with the results that we’re getting. Moving forward, as I’ve said consistently, I think, over the last three or four quarters, we will continue to invest in this business for the long term, and building brand saliency and keeping our brands vibrant is the best way to drive that consistency. Operator: The next question comes from Olivia Tong with Raymond James. Please go ahead. Olivia Tong: Great, thanks, good morning. I wanted to ask you a little bit about your organic sales guide for the rest of the year. Obviously, conceptually understand why you wouldn’t [indiscernible] the 10 points continuing, but why would organic sales decelerate as the comps ease? Presumably you’re getting more pricing and clearly we understand that this is a really dynamic environment, but would love to get a little bit more color in terms of your expectations for the rest of the year, because it sounds like you’re very bullish on innovation, on pricing capability, on volume acceleration, etc., so would appreciate a little bit more color there. Thank you. Noel Wallace: Sure, thanks Olivia. So clearly some of the comps get more difficult as we go through the year to go. We took obviously a lot of pricing and we’ll see that pricing become more benign or will slow in the back half of the year, to be determined how much of that comes back into volume. The good news is the first quarter and some of the success that we saw in the fourth quarter give us confidence that the volume is returning as we expected. Elasticities are in line as we expected, so we feel pretty good about where we are. Again, I think the biggest differentiator here in terms of how we think about it is we’re only in the first quarter. There’s a lot of economic uncertainty out there in terms of what’s happening. We still see foreign exchange being a headwind - that will certainly have an impact as we have to take pricing in some markets. Interest is going to stay stubbornly high, we expect, through the balance of the year, so overall we’re still early in the year. Very confident in the guidance that we’ve provided and the strategy that we’re executing, but we want to make sure we maintain operational flexibility through the balance of the year to ensure we continue to execute the strategy that we’ve been communicating to drive consistent compounded earnings share growth. Operator: The next question comes from Chris Carey with Wells Fargo. Please go ahead. Chris Carey: Hi, good morning everyone. One quick follow-up on gross margin and then a question on North America. On gross margin, I think there was an expectation that Q1 would be down quarter-over-quarter relative to Q4. Clearly very strong delivery in the quarter. Stan, you mentioned a bit of benefit from Argentina, or are you seeing better developments elsewhere, whether that’s in commodities, perhaps some of the new pricing on Hill’s or maybe you’re over-delivering on productivity, so just maybe contextualize what seems to have come in a bit better there. Just on North America, it was the best volume growth in nearly two years. I realize Fabuloso was a benefit there, but Noel, you also mentioned needing to work on market share. Can you maybe just help us understand the underlying momentum of the business right now and how to think about this going forward? Thanks. Noel Wallace: Sure, thanks for the question. Let me take the North America, and I’ll let Stan jump into some of your questions around gross profit. Overall, the strategy in North America that we’re executing, we feel good about it. We’ve been very focused, as we’ve talked about before, on improving the middle of the P&L, getting gross margins back to where they needed to get to, getting operating margins where they needed to get back to, and reinvesting that into the business in order to drive market shares. The value shares, as I mentioned, have been a little bit choppy and will continue to be a little bit choppy, for the reasons I stated earlier; however, we are seeing better execution of our innovation and our promotional strategies, and that’s helping to drive nice volume share in the quarter, both across toothpaste which was up nicely, and toothbrushes from a volume standpoint. Again, we feel good about that, and we still have a lot of work to do across the business, as we’ve talked about on prior calls, and I’ve got great confidence in Jesper and his team and the strategy that we’re deploying with real patience, because we know it’s going to take some time, but we feel in the long term we’re going to end up in a much better place from that. The only other thing I’d say is the non-Nielsen business in the North America business continues to grow at multiples of the Nielsen business, and obviously that’s not captured in the market share, so we feel good about the overall health of the business, but we’ll consistently continue to drive the opportunities that we see in the Nielsen-based accounts. Stan Sutula: And Chris, to your question on the sequential margin improvement, first of all, we’re pleased with that sequential margin improvement. Argentina was a little bit less of a headwind, and as you’ve watched that FX, it’s been very volatile. We’ve taken actions to address it, including sourcing changes, pricing changes, etc., and then the team, candidly, executed really well. We get a little bit of scale benefit from volume, we get some improvement from RGM, and Funding the Growth was great execution starting the year. We love the start to the year and we know FX is going to continue to be volatile, not just in Argentina but in many areas around the world. Solid start to the year, slightly better than we anticipated on a sequential basis, but pleased with the progress. Operator: The next question comes from Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman: Great, thanks. I was wondering if we could talk a little bit about Europe - numbers were super strong, a little bit of context around where you’re seeing particular areas of strength in volume would be great. Then just any recent thoughts on private label? Unilever brought up yesterday its seen a little more incremental pressure from private label in Europe, so was just curious to hear your perspective on that as well. Thanks. Noel Wallace: Yes, thanks Lauren. A great quarter for Europe, and again terrific execution from the team on the ground. Overall, really, really strong with growth across the vast majority of our business, and it wasn’t just oral care, it was pretty broad-based. Obviously as you saw, volumes inflected positively given that we’re still getting pricing in the category, so pricing will ramp down as we move through the balance of the year. The big change, I think, is our investment strategy in Europe. We see real opportunities for growth, particularly in the oral care and personal care segments as we execute some of the innovations that we have there. The Meridol and Elmex shares, broad-based across Europe are at record levels and growing really, really nicely. Again, that is a shift in strategy, and what’s nice is we’re getting the complementary growth on the Colgate side of the business, particularly as we’re more focused on the whitening opportunity that we have. A great portfolio of brands that we’re leveraging, we think more strategically around the region, so the market shares overall look pretty good. In terms of private label, as you know, private label has higher penetration in Europe than it does anywhere else in the world. We have seen some acceleration in some of the home care categories, whether it’s dish liquid or fabric softeners or floor cleaners, but that being said, we continue to have good growth across our business, particularly as we, as I mentioned earlier, broaden the investment strategy across a wider array of our brands in Europe. Operator: The next question comes from Bryan Spillane with Bank of America. Please go ahead. Bryan Spillane: Hey, thanks Operator. Good morning everyone. Stan, just had a couple of questions just related to cash flow. One, I don’t know--maybe I missed it, but if we have a guide for capital spending for the year, and then I think you refinanced or you funded a maturity in the middle of the quarter with commercial paper. Just kind of curious there, were you just looking to pay it down or will you look to refinance that or term it out at some point? Then maybe just more broadly, as we’re thinking about cash flow, given where exchange rates have moved, interest rates have moved, just any other thoughts on how we should be thinking about free cash flow conversion this year and uses of free cash flow. Stan Sutula: Bryan, thanks for the question. First, we’re pleased with the cash flow performance, really solid start for the quarter. We’re down a little bit year-over-year, but I’ll remind you last year was a terrific cash quarter, and this was really driven by receivables, which were impacted by the timing of Easter. In fact, we’ve looked at the first couple days of the quarter and that collection period completely brought DSO back in line, so we’re very comfortable with that. Our cash profits really have been helped from the top line growth, and the net working capital execution, I was very pleased with what the team accomplished here in first quarter, particularly around inventory. Even with the Red Sea challenges and building up a little safety stock in certain areas, great execution on inventory, you saw the inventory days improve. DSO is strictly timing. In regards to your question on capex, we had said previously that we expect capex as a percent of sales to be lower than last year, and that’s really driven by Tide and Oxy coming online and that investment dollars dropping off. If we look at our leverage, the strong cash flow and execution has allowed us to bring our leverage using the S&P methodology down to 1.8 times, so an improvement from year end; and to your point, we did pay back a bond here in first quarter, $500 million, and we did that with CP. Two reasons - one, we had very good strong cash flow, and two, at some point we expect interest rates will come down, though that appears to be sliding farther out to the right, and that will help us keep our fixed-floating back in balance. Again, as we look at cash flow, strong performance, and as we think about that, it kind of goes back into the capital allocation, and I think you’ve seen that manifest itself in our strategy. That capital allocation hasn’t changed - it’s best in the business, and you’re going to see capex go up and down. We’re investing in advertising, return to shareholders - we had a dividend increase and you saw our share buyback in the quarter, and then M&A where we look at options to improve our overall portfolio. Noel Wallace: Yes Bryan, the only thing I would add is, again picking up on the theme of flexibility, it’s not only flexibility throughout the P&L but it’s having a really strong balance sheet that gives us the flexibility to deploy capital as we see the best return on that investment. I give Stan and the finance organization huge credit and the discipline they’re bringing around the world to ensure that the cash generation continues to be robust. Operator: The next question comes from Mark Astrachan with Stifel. Please go ahead. Mark Astrachan: Hey, thanks. Good morning everybody. I wanted to go back to North America and the outperformance of these untracked channels. We can now start to see in some of the data the distinction between the new and the legacy channels, and it’s pretty stark in your business in particular, Hill’s specifically, but overall there’s a lot more growth in those channels - I guess they’re smaller. But curious your take on what is driving that exceptional outperformance, and how sustainable is it in terms of these other places, like Costco, Amazon, etc. that’s contributing to that growth, overall and I’m specifically look to Hill’s, which is really doing quite well in those new channels. Thanks. Noel Wallace: Yes, thanks. Again, we’ve been talking about that for quite some time, and that has been, I think a reflection of the strategy that we talked about for three years, which is core, adjacencies and channels. Getting back to a real focus and understanding the consumer journey across all of the markets in which we compete has been fundamental to making sure that we have strategies to capture and deploy our investments in areas where we think we’re going to get the best return for that. Some of these emerging channels that are not captured by Nielsen are very, very important, whether that’s hard discount stores in parts of the world, whether that’s the club store environment where the value pack and large sizes continue to be a big growth driver, whether that’s the ease and convenience of shopping online and some of the digital execution and understanding the digital shelf and the discipline that we’ve brought to that. That ultimately is being seen through the success that we’re having in those alternative channels. We don’t anticipate that that will change. I think as some of the classical brick and mortar retailers really up their game, and we’re certainly seeing that across the U.S. markets where the big players are certainly becoming far more sophisticated and progressive with their offerings and their shopper experience. We’re partnering with them to ensure that our brands are involved in that journey that they’re on and making sure that we’re bringing our digital capabilities to the entire omnichannel environment and making sure that Colgate and the brands that we offer are at the forefront of that. It’s again shopper journey, the experience that shoppers are getting, the value orientation on some of those channels, and our ability to be much more targeted with some of our spend, and that’s particularly related to the online retailers. Operator: The next question comes from Brett Cooper with Consumer Edge Research. Please go ahead. Brett Cooper: Thank you, good morning. A question for you on the competitive environment and outlook. It would appear to date that promotional activity and competition hasn’t ramped to the extent that some had feared. Some of your large peers are looking to accelerate growth via reinvestments, so would love to hear, first, whether that assessment on the environment is accurate generally, and then your perspective on whether there’s enough opportunity to elevate category growth via things like household penetration growth, premiumization and share gains to net higher levels of growth, or is all of this reinvestment just the new cost of doing business? Thanks. Noel Wallace: Yes, thanks Brett. What’s interesting is you’re seeing--I think you’re hearing that a lot of the competitive set has focused on building healthy category growth, and that’s two ways: one, with increased media investment, and the second is with increased innovation. We have not seen a fundamental shift around the world to more volume sold on promotion - it’s still below where we were pre-COVID. Now as volume becomes the important aspect here, you may see some players move to that strategy of doing more promotions, but overall the category has been very constructive in terms of big players spending money on media, driving value to the categories through innovation, and offerings that are differentiated in the marketplace, and so its incumbent upon us to ensure that our innovations continue to drive real value to the category and differentiation in a very competitive market, and making sure that we’re using the analytics and the data that we have to drive balanced promotional strategies in the categories. We’ll be competitive where we need to be. I’ve mentioned we’ve made some difficult decisions in the U.S. business to not chase a lot of deep down in promotions, particularly in certain retail environments. That will have a short term impact on the Nielsen shares, but long term we feel we’re going to deploy that money in an effective way. Again, it’s making sure that we continue to drive saliency of our brands and the health of our brands long term, and we do that through media and innovation, not necessarily through promotions. Operator: The next question comes from Alejandro Zamacona with HSBC. Please go ahead. Alejandro Zamacona: Thank you, good morning. Would just like to follow up on Latin America. Given the strong organic sales [indiscernible] the last few quarters, what should we expect going forward? To what extent is the consumer willing to continue to accept meaningful price increases without giving up volumes? Noel Wallace: Yes, good morning Alejandro. Again, let me contextualize Latin America. Obviously a really strong organic sales growth quarter with and without Argentina. There was good volume growth across every single hub, led by Brazil which was up double digits. If I take the last four quarters of Latin America in terms of volume, 0.5, 5.4, 8, and 6.2, so again very consistent with what we talked about. Our ability to get pricing early in the market has allowed now to see the volume return to the categories and ultimately into our business. Our marketing is really strong and innovation is very strong on the ground, and so we feel very good about what we’re seeing, and that’s been translating into really positive share growth for the business. Ex Argentina, very good organic growth - you know, organic up significantly in the region. I think you saw double-digit growth in Brazil, which has been terrific. Oral care particularly has been really strong in the quarter - that was up double digits, excluding Argentina. Shares in value and volume up - it’s been quite some time since we saw both of those move in the right direction, and again a reflection, I believe of the strategy of increased investment and making sure that we have a breadth of offerings in that market. That is a market that’s accustomed to inflationary pricing across many of the markets in which we compete. Being key for us is making sure that we continue to advertise strongly in the markets and we bring real innovation across the entire portfolio. That keeps the categories vibrant, allows us to work with our retailers to drive category growth, and hopefully capture share at the same time. So overall, we think Latin America is well positioned for continued growth and we like what we’re seeing there. Operator: This concludes our question and answer session. I would like to turn the conference back over to Noel Wallace, Colgate’s Chairman, President and CEO for closing remarks. Noel Wallace: Great, well thanks everyone for joining the call today. Obviously we’re really pleased with the quarter and how we’ve gotten off to a strong start that we believe sets us up for continued sustainable growth moving forward and generating a long term algorithm that we’ve been talking about for quite some time for our shareholders. Let me particularly reach out to all of the Colgate employees around the world for their incredible dedication and resilience and their hard work in really executing a strategy around the world, and for getting us off to a great start. Thanks everyone. We’ll see you and talk to you soon. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Colgate-Palmolive's (NYSE:CL) Impressive Quarterly Earnings Report
Colgate-Palmolive (NYSE:CL) is a well-known consumer products company, primarily recognized for its oral care, personal care, home care, and pet nutrition products. The company competes with other giants like Procter & Gamble and Unilever in the consumer goods sector. On April 25, 2025, CL reported impressive quarterly earnings, showcasing its strong market position.
CL reported earnings per share (EPS) of $0.91, surpassing the Zacks Consensus Estimate of $0.86. This marks an improvement from the $0.86 EPS reported in the same quarter last year. The company's revenue reached approximately $4.91 billion, exceeding the estimated $4.87 billion, highlighting its robust sales performance.
The company's price-to-earnings (P/E) ratio is around 26.13, indicating that investors are willing to pay $26.13 for every dollar of earnings. This suggests a positive market sentiment towards CL's future earnings potential. The price-to-sales ratio of 3.73 reflects the market's valuation of its revenue, while the enterprise value to sales ratio of 4.10 shows how the market values the company's total worth relative to its sales.
Colgate-Palmolive's enterprise value to operating cash flow ratio is approximately 20.04, providing insight into its valuation concerning cash generation. The earnings yield of about 3.83% offers a perspective on the return investors can expect. The company's debt-to-equity ratio of 40.15 indicates a balanced approach to financing its assets, while a current ratio of 0.92 suggests its ability to cover short-term liabilities with short-term assets.
Colgate-Palmolive Company (NYSE:CL) Financial Overview and Analyst Insights
- The consensus price target for Colgate-Palmolive Company (NYSE:CL) has been adjusted downwards, from $102.25 a year ago to $89 a month ago, reflecting a more conservative outlook from analysts.
- Despite inflationary pressures, Colgate-Palmolive reported a healthy profit margin of 14.4% and surpassed $20 billion in revenue in 2024.
- With a robust gross profit margin exceeding 60% and a return on total capital of 27.9%, Colgate-Palmolive is considered a strong defensive stock amidst recession concerns.
Colgate-Palmolive Company (NYSE:CL) is a global leader in consumer products, known for its strong brand presence in Oral, Personal, and Home Care, as well as Pet Nutrition. Despite its diverse product offerings, the consensus price target for CL has seen a downward adjustment over the past year, reflecting a more conservative outlook from analysts. A year ago, the average price target was $102.25, but it has since decreased to $89 a month ago.
The company's financial performance in 2024 was impressive, with revenue surpassing $20 billion, as highlighted by Benzinga. This success is attributed to Colgate-Palmolive's strong brand identity and operational discipline. Despite inflationary pressures, the company maintained a healthy profit margin of 14.4% and continued to invest in marketing and research and development, enhancing brand differentiation and price stability.
Analysts are closely watching Colgate-Palmolive's upcoming earnings report, with Jason English from Goldman Sachs setting a price target of $95 for the stock. Despite the downward adjustment in the consensus price target, the company demonstrates financial robustness with significant revenue and margin growth, generating record free cash flow. This positions Colgate-Palmolive well for the future, with a "Buy" rating and a target share price of $100.08 for 2025.
As concerns about a potential recession grow, investors are shifting towards more defensive stocks, with Colgate-Palmolive emerging as a strong candidate due to its non-cyclical nature. The company boasts a robust gross profit margin exceeding 60% and an impressive return on total capital of 27.9%, as highlighted by Seeking Alpha. Despite the conservative outlook, Colgate-Palmolive's stock is considered fairly valued, featuring a shareholder value yield that surpasses its historical average and a reasonable price-to-earnings ratio of 25.6x.
Colgate-Palmolive’s Price Target Boosted at Argus
Argus analysts increased their price target on Colgate-Palmolive (NYSE:CL) to $107 from $97, while maintaining a Buy rating on the stock. The analysts praised Colgate-Palmolive as a well-established company with leading brands and expressed a positive outlook on the company's products that incorporate natural ingredients, as well as its new lines of pet food designed for younger pets and older pets with kidney issues. The company has consistently met or exceeded its long-term target for organic sales growth of 3%-5% over the past four years. Additionally, it has increased its dividend annually for over 60 years, currently offering a yield of approximately 2.1%.
Looking forward, the analysts expect Colgate-Palmolive to focus on enhancing its offerings of premium products, expanding online sales, leveraging analytics, and improving productivity. From a technical perspective, the stock has shown a bullish pattern of higher highs and higher lows since October 2023. On the valuation front, the stock trades at 25 times the analyst’s 2025 earnings per share (EPS) forecast, which is above the peer average of 23.
Given the company’s broadening product range and solid dividend track record, the analysts reiterate a Buy rating. The revised target price of $107 reflects a valuation multiple of 28 times the 2025 EPS estimate.
Deutsche Bank Ups Colgate-Palmolive Price Target to $98 Amid Market Optimism
Deutsche Bank Raises Price Target for Colgate-Palmolive Company (CL:NYSE)
Deutsche Bank's recent decision to raise its price target for Colgate-Palmolive Company (CL:NYSE) to $98 reflects a positive outlook on the company's financial health and market position. This adjustment, representing an 8.17% increase from its current price of $90.6, signals confidence in Colgate-Palmolive's potential for growth and profitability. The announcement, made on April 29, 2024, and detailed by StreetInsider, suggests that Deutsche Bank sees underlying strengths in Colgate-Palmolive that could drive its stock price higher in the near future.
The timing of Deutsche Bank's revised price target coincides with Colgate-Palmolive reaching a new 52-week high, an event that has undoubtedly captured the attention of the investment community. According to a report by Zacks Investment Research, also published on April 29, 2024, there's a growing interest in evaluating the company's fundamentals to understand whether its stock has the momentum to continue its upward trajectory. This surge to a new high, with the stock price peaking at $92.25 over the past year, underscores the company's robust performance in the market.
Colgate-Palmolive's market capitalization of approximately $74.1 billion, coupled with a trading volume of 1,524,884 shares, highlights its significant presence on the New York Stock Exchange (NYSE). Despite a slight decrease of 1.08% to $90.025 on the day of the announcement, the stock's performance over the year—from a low of $67.62 to its recent high—demonstrates a strong upward trend that has likely contributed to Deutsche Bank's optimistic price target.
The fluctuation in Colgate-Palmolive's stock price, ranging between $89.96 and $91.24 on the day, indicates active trading and investor interest in the company. This level of activity, combined with the company's solid market capitalization, suggests that Colgate-Palmolive is well-regarded in the financial markets, with investors closely monitoring its performance for signs of continued growth.
In summary, Deutsche Bank's updated price target for Colgate-Palmolive, set against the backdrop of the company's recent achievement of a new 52-week high and its strong market fundamentals, paints a picture of a company on the rise. With analysts and investors alike keeping a close eye on its performance indicators, Colgate-Palmolive appears to be in a favorable position to capitalize on its current momentum in the market.
Colgate-Palmolive Q1 2024 Earnings Surpass Expectations
Colgate-Palmolive's Impressive Earnings Report Highlights Financial Strength
On Friday, April 26, 2024, Colgate-Palmolive (CL:NYSE) reported its earnings before the market opened, showcasing a significant performance. The company's revenue reached $5.07 billion, surpassing the estimated $4.96 billion, indicating a strong financial outcome for the period. This achievement was a result of a balanced mix of volume and pricing growth, which played a crucial role in driving the top-line revenue higher than expected. The positive outcome of the earnings report was further supported by the company's optimistic revision of their financial outlook, as highlighted by Zacks Investment Research.
The uptick in Colgate's stock following the announcement can be attributed to the expansions in both gross and operating profit margins, which were instrumental in bolstering the company's bottom line. This indicates that not only did the company manage to increase its revenue, but it also improved its profitability, making it a more attractive investment. The detailed analysis provided by Zacks Investment Research underscores the importance of these financial metrics in evaluating the company's performance over time and against market expectations.
The earnings conference call, which featured key company executives and saw participation from financial analysts representing prestigious institutions, underscores the financial community's interest in Colgate-Palmolive's performance and strategic direction. This level of engagement from the financial community is a testament to the company's market position and its ability to generate interest among investors and analysts alike.
Furthermore, Colgate-Palmolive's financial ratios provide a deeper insight into the company's valuation and financial health. With a price-to-earnings (P/E) ratio of approximately 28.77, investors are shown to have confidence in the company's future earnings potential. The price-to-sales (P/S) ratio of about 3.79, enterprise value to sales (EV/Sales) ratio of roughly 4.17, and enterprise value to operating cash flow (EV/OCF) ratio of approximately 22.34, all indicate the market's positive valuation of the company's sales and cash flow. Additionally, the debt-to-equity (D/E) ratio of about 37.78 shows a manageable level of debt, and the current ratio of approximately 1.06 indicates the company's ability to cover its short-term liabilities, further affirming its financial stability.
In summary, Colgate-Palmolive's first-quarter earnings report for 2024 not only exceeded expectations in terms of revenue but also demonstrated strong profitability and an optimistic financial outlook. The company's financial ratios and the interest from the financial community during the earnings call further validate its solid market position and attractiveness to investors.
Colgate-Palmolive Reports Better Than Expected Q1 Results, Lifts Guidance
Colgate-Palmolive (NYSE:CL) released its first-quarter earnings, which exceeded analyst forecasts. The company achieved an adjusted EPS of $0.86, beating the anticipated $0.81. Its revenue also exceeded projections, reaching $5.07 billion against the forecast of $4.96 billion.
Colgate-Palmolive saw a 6.2% increase in net sales and a 9.8% rise in organic sales, continuing a strong performance across all divisions and categories. This growth extends the company's streak of double-digit increases in operating profit, net income, and EPS for the third consecutive quarter. The company also maintains a strong global market share in toothpaste and manual toothbrushes at 41.3% and 31.7%, respectively.
CEO Noel Wallace highlighted the successful execution of the company’s strategy and investments in sustaining business health as key to these results. He expressed confidence in the effectiveness of their strategies for meeting the updated 2024 financial targets and sustaining consistent earnings growth.
For the full year of 2024, Colgate-Palmolive revised its net sales growth guidance upward to 2% to 5%, previously 1% to 4%. This includes an expected mid-single-digit negative impact from foreign exchange fluctuations. The forecast for organic sales growth was also adjusted upward to 5% to 7%, from 3% to 5%. The company continues to expect an expansion in gross profit margin and anticipates double-digit growth in GAAP EPS. For adjusted EPS, the company projects a mid to high-single-digit growth.
Investing in Stability: Colgate-Palmolive's Market Resilience
Seeking Stability with Colgate-Palmolive in Your Investment Portfolio
In the context of seeking stability within an investment portfolio, as discussed in the InvestorPlace article, Colgate-Palmolive (CL:NYSE) emerges as a prime example of what might be considered a "Steady Eddie." The company's recent financial performance for the quarter ending in March 2024, as analyzed by Zacks Investment Research, underscores its potential as a solid anchor for investors. This is particularly relevant in times when the market faces turbulence, such as the recent volatility in the cryptocurrency sector. Colgate-Palmolive's ability to maintain steady financial metrics amidst market fluctuations makes it an attractive option for those looking to mitigate risk in their investment portfolios.
The financial report disclosed by Colgate-Palmolive reveals significant insights into the company's stability and growth prospects. With the stock price witnessing a 1.21% rise to close at $90.37, as highlighted by Zacks Investment Research, it's clear that the company enjoys investor confidence. This price increase is not just a random spike; it represents the highest price point for the year at $92.25, indicating a strong market position. Such performance is crucial for investors seeking reliable stocks that can withstand market pressures and still deliver growth.
Moreover, the trading volume of about 3 million shares, coupled with a market capitalization of approximately $74.39 billion, reflects Colgate-Palmolive's substantial presence in the market. These figures are indicative of a company that is both highly valued and actively traded, traits that are often associated with stable investments. The fact that the stock price has been able to reach its yearly high, moving from a low of $67.62 to $92.25, further attests to its resilience and potential for steady growth.
Understanding the financial health and market position of a company like Colgate-Palmolive is essential for investors, especially in the context of seeking stability as advised by the InvestorPlace article. The detailed look at the company's top and bottom line numbers, as provided by Zacks Investment Research, offers a clear picture of how Colgate-Palmolive stands in comparison to Wall Street estimates and its performance in the previous year. This analysis is invaluable for investors aiming to build a portfolio that can weather market volatility while still aiming for growth.
In conclusion, Colgate-Palmolive represents a compelling case for inclusion in an investment portfolio as a "Steady Eddie." Its recent financial performance, market capitalization, and stock price movements provide a solid foundation for investors looking for stability in uncertain times. As the cryptocurrency market and other investment sectors experience fluctuations, the steadiness offered by companies like Colgate-Palmolive becomes increasingly important for those aiming to secure their financial future.
