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Colgate-Palmolive Company (CL - Free Report) has reported second-quarter 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. Results have benefited from strong top-line growth, improved organic volume performance, and gross and operating profit margin expansions. Notably, the company has delivered double-digit growth in operating profit, net income and earnings per share for the fourth consecutive quarter.
On a Base Business basis (non-GAAP basis), earnings were 91 cents per share, up 18% from the prior-year period. The bottom line surpassed the Zacks Consensus Estimate of 87 cents.
Net sales of $5.1 billion increased 4.9% from the year-ago quarter and beat the Zacks Consensus Estimate of $5,012 million. On an organic basis, the company’s sales advanced 9%. The sales momentum was mainly driven by organic sales growth in all six divisions and across all four categories. The rise was led by mid-teen organic sales growth in oral care from last year.
Following the strong second-quarter 2024 results and a raised adjusted earnings view, shares of Colgate rose 1.6% in the pre-market trading session on Jul 26, 2024. Shares of this Zacks Rank #3 (Hold) company have rallied 6.6% in the past three months compared with the industry’s growth of 5.2%.
Image Source: Zacks Investment Research
Q2 Details
Colgate’s organic sales growth reflected augmented volume and higher pricing. The company reported volume increase in every operating division, aided by higher brand penetration to drive category gains.
Total volumes rose 4.7% year over year on an organic and reported basis, attributed to growth across all divisions. The quarter marked the return of Hill’s and the Asia-Pacific segments to volume growth, while North America, Africa/Eurasia and Europe experienced sequential increases in volume.
Meanwhile, pricing improved 4.2% year over year, backed by positive pricing across all divisions, except for North America. Currency negatively impacted sales growth by 4.1% in the quarter. Currency translations were mainly hurt by Argentina and several countries in the Africa/Eurasia division. Excluding Argentina, the company experienced low-single-digit adverse currency effects.
We estimated organic sales growth of 7.3% for the second quarter, with a 6.5% rise in pricing and a 0.8% increase in volume.
Colgate-Palmolive Company Price, Consensus and EPS Surprise
Gross profit of $3.07 billion improved 10% year over year. The gross profit margin expanded 280 basis points (bps) to 60.6% on a GAAP basis. Adjusted gross profit improved 10.3% year over year to $3.08 billion, with the adjusted gross margin expanding 300 bps to 60.8%. We expected the adjusted gross margin to expand 210 bps to 59.9% for the second quarter.
Adjusted selling, general and administrative (SG&A) expenses grew 9.7% year over year to $1.9 billion. As a percentage of net sales, adjusted SG&A expenses increased 170 bps year over year to 38.3%. We predicted adjusted SG&A expenses, as a percentage of revenues, to expand 90 bps to 37.5%.
The company’s adjusted operating profit of $1.1 billion advanced 13% year over year. The adjusted operating profit margin expanded 150 bps year over year to 22.1%, owing to continued investments in advertising. We expected the adjusted operating margin to expand 110 bps to 21.7% for the second quarter.
Colgate’s global market share in the manual toothbrushes category has reached 32.2% year to date. The company has maintained its leadership position in the global toothpaste market, with a market share of 41.5% year to date.
Segmental Discussion
North America’s net sales (20% of total sales) rose 2.5% year over year on both reported and organic basis. The segment gained from a 5.9% increase in volume, offset by a 3.3% decline in pricing. The segment witnessed volume growth, backed by gains in toothpaste on increased household penetration. Volume growth in Fabuloso and Softsoap liquid hand soap also aided the performance.
Latin America’s net sales (25% of the total sales) advanced 7.6% year over year on 13.3% pricing gains and a 5.5% increase in volume, offset by an 11.2% unfavorable currency impact. On an organic basis, sales rose 18.8%, led by volume growth across all countries in the region, except for Argentina. Also, it witnessed high-single-digit volume growth for the oral care, personal care and home care categories.
Europe’s net sales (14% of the total sales) increased 6.2% year over year on a reported basis and 6.5% on an organic basis. Sales growth was driven by a 5.2% rise in volume and a 1.3% pricing gain, offset by a 0.2% unfavorable currency impact. By category, the volume increase was primarily driven by high-single-digit growth in oral care. Pricing continued to be positive, owing to the consistent implementation of its revenue growth management strategies.
The Asia Pacific segment’s net sales (14% of the total sales) improved 2.6% year over year, reflecting a 3.4% increase in volume and a 1.7 rise in pricing, offset by a 2.5% adverse impact of currency. Organic sales improved 5.1% due to volume growth at its largest businesses.
Africa/Eurasia’s net sales (5% of the total sales) rose 2.2% year over year due to an 8.4% increase in volume and 8% growth in pricing, offset by a 14.3% unfavorable currency impact. Organic sales for the segment grew 16.4%, driven by strong pricing and volume gains. Volume improvement mainly stemmed from double-digit increase in oral care.
Hill’s Pet Nutrition’s net sales (22% of the total sales) improved 5.5% from the year-ago quarter on a reported basis and 6.1% on an organic basis. Results gained from a 2.5% increase in volume and a 3.7% rise in pricing, offset by a 0.7% negative currency impact. The segment’s volume was impacted by lower volume from private labels. Despite soft volumes, the segment benefited from market share growth for its Hill’s Science Diet and Hill’s Prescription Diet across the specialty channels, driven by its science-led innovation and improved brand support.
Other Financial Details
Colgate ended second-quarter 2024 with cash and cash equivalents of $1.1 billion, and a total debt of $8.7 billion. Net cash provided by operating activities was $1.7 billion for the first six months of 2024. The free cash flow before dividends was $1.4 billion.
Outlook
Management has raised its organic sales and base business EPS forecasts for 2024 and has reaffirmed its sales view. Colgate anticipates net sales growth of 2-5%. This reflects a higher organic sales view, offset by the increased negative impact of currency translations.
The company expects organic sales growth of 6-8% for 2024 versus the 5-7% rise mentioned earlier. Although the company retained its guidance of a mid-single-digit negative impact of currency, it expects a greater negative impact within the range due to the recent adverse movements in the Mexican peso and the Brazilian real.
CL foresees gross profit margin expansion on both GAAP and adjusted basis, driven by continued pricing gains, benefits from revenue growth management initiatives and strength in the funding-the-growth program. On both GAAP and adjusted basis, the company anticipates higher advertising costs, both on a dollar basis and as a percentage of sales, for 2024. CL expects the tax rate for 2024 to be 23.5-24.5% on both a GAAP and adjusted basis.
Colgate expects adjusted earnings per share to increase 8-11% for 2024 compared with mid to high-single-digit growth stated earlier. On a GAAP basis, earnings per share are expected to rise in the double digits.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Vital Farms (VITL - Free Report) , Freshpet (FRPT - Free Report) and Post Holdings (POST - Free Report) .
Vital Farms, which offers a range of produced pasture-raised foods, currently flaunts a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vital Farms’ current fiscal year’s sales and earnings suggests growth of 24.9% and 66.1%, respectively, from the year-ago reported numbers.
Freshpet, a pet food company, presently sports a Zacks Rank #1. FRPT has a trailing four-quarter earnings surprise of 118.2%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 25% and 177.1%, respectively, from the year-ago period’s reported figure.
POST is a consumer-packaged goods holding company involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. Post Holdings currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for the company’s current financial-year sales and earnings suggests growth of 14.2% and 6.9%, respectively, from the year-ago period's reported figures. POST has a trailing four-quarter earnings surprise of 41%, on average.
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Colgate (CL) Stock Gains on Q2 Earnings Beat, '24 EPS View Hike
Colgate-Palmolive Company (CL - Free Report) has reported second-quarter 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. Results have benefited from strong top-line growth, improved organic volume performance, and gross and operating profit margin expansions. Notably, the company has delivered double-digit growth in operating profit, net income and earnings per share for the fourth consecutive quarter.
On a Base Business basis (non-GAAP basis), earnings were 91 cents per share, up 18% from the prior-year period. The bottom line surpassed the Zacks Consensus Estimate of 87 cents.
Net sales of $5.1 billion increased 4.9% from the year-ago quarter and beat the Zacks Consensus Estimate of $5,012 million. On an organic basis, the company’s sales advanced 9%. The sales momentum was mainly driven by organic sales growth in all six divisions and across all four categories. The rise was led by mid-teen organic sales growth in oral care from last year.
Following the strong second-quarter 2024 results and a raised adjusted earnings view, shares of Colgate rose 1.6% in the pre-market trading session on Jul 26, 2024. Shares of this Zacks Rank #3 (Hold) company have rallied 6.6% in the past three months compared with the industry’s growth of 5.2%.
Image Source: Zacks Investment Research
Q2 Details
Colgate’s organic sales growth reflected augmented volume and higher pricing. The company reported volume increase in every operating division, aided by higher brand penetration to drive category gains.
Total volumes rose 4.7% year over year on an organic and reported basis, attributed to growth across all divisions. The quarter marked the return of Hill’s and the Asia-Pacific segments to volume growth, while North America, Africa/Eurasia and Europe experienced sequential increases in volume.
Meanwhile, pricing improved 4.2% year over year, backed by positive pricing across all divisions, except for North America. Currency negatively impacted sales growth by 4.1% in the quarter. Currency translations were mainly hurt by Argentina and several countries in the Africa/Eurasia division. Excluding Argentina, the company experienced low-single-digit adverse currency effects.
We estimated organic sales growth of 7.3% for the second quarter, with a 6.5% rise in pricing and a 0.8% increase 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 $3.07 billion improved 10% year over year. The gross profit margin expanded 280 basis points (bps) to 60.6% on a GAAP basis. Adjusted gross profit improved 10.3% year over year to $3.08 billion, with the adjusted gross margin expanding 300 bps to 60.8%. We expected the adjusted gross margin to expand 210 bps to 59.9% for the second quarter.
Adjusted selling, general and administrative (SG&A) expenses grew 9.7% year over year to $1.9 billion. As a percentage of net sales, adjusted SG&A expenses increased 170 bps year over year to 38.3%. We predicted adjusted SG&A expenses, as a percentage of revenues, to expand 90 bps to 37.5%.
The company’s adjusted operating profit of $1.1 billion advanced 13% year over year. The adjusted operating profit margin expanded 150 bps year over year to 22.1%, owing to continued investments in advertising. We expected the adjusted operating margin to expand 110 bps to 21.7% for the second quarter.
Colgate’s global market share in the manual toothbrushes category has reached 32.2% year to date. The company has maintained its leadership position in the global toothpaste market, with a market share of 41.5% year to date.
Segmental Discussion
North America’s net sales (20% of total sales) rose 2.5% year over year on both reported and organic basis. The segment gained from a 5.9% increase in volume, offset by a 3.3% decline in pricing. The segment witnessed volume growth, backed by gains in toothpaste on increased household penetration. Volume growth in Fabuloso and Softsoap liquid hand soap also aided the performance.
Latin America’s net sales (25% of the total sales) advanced 7.6% year over year on 13.3% pricing gains and a 5.5% increase in volume, offset by an 11.2% unfavorable currency impact. On an organic basis, sales rose 18.8%, led by volume growth across all countries in the region, except for Argentina. Also, it witnessed high-single-digit volume growth for the oral care, personal care and home care categories.
Europe’s net sales (14% of the total sales) increased 6.2% year over year on a reported basis and 6.5% on an organic basis. Sales growth was driven by a 5.2% rise in volume and a 1.3% pricing gain, offset by a 0.2% unfavorable currency impact. By category, the volume increase was primarily driven by high-single-digit growth in oral care. Pricing continued to be positive, owing to the consistent implementation of its revenue growth management strategies.
The Asia Pacific segment’s net sales (14% of the total sales) improved 2.6% year over year, reflecting a 3.4% increase in volume and a 1.7 rise in pricing, offset by a 2.5% adverse impact of currency. Organic sales improved 5.1% due to volume growth at its largest businesses.
Africa/Eurasia’s net sales (5% of the total sales) rose 2.2% year over year due to an 8.4% increase in volume and 8% growth in pricing, offset by a 14.3% unfavorable currency impact. Organic sales for the segment grew 16.4%, driven by strong pricing and volume gains. Volume improvement mainly stemmed from double-digit increase in oral care.
Hill’s Pet Nutrition’s net sales (22% of the total sales) improved 5.5% from the year-ago quarter on a reported basis and 6.1% on an organic basis. Results gained from a 2.5% increase in volume and a 3.7% rise in pricing, offset by a 0.7% negative currency impact. The segment’s volume was impacted by lower volume from private labels. Despite soft volumes, the segment benefited from market share growth for its Hill’s Science Diet and Hill’s Prescription Diet across the specialty channels, driven by its science-led innovation and improved brand support.
Other Financial Details
Colgate ended second-quarter 2024 with cash and cash equivalents of $1.1 billion, and a total debt of $8.7 billion. Net cash provided by operating activities was $1.7 billion for the first six months of 2024. The free cash flow before dividends was $1.4 billion.
Outlook
Management has raised its organic sales and base business EPS forecasts for 2024 and has reaffirmed its sales view. Colgate anticipates net sales growth of 2-5%. This reflects a higher organic sales view, offset by the increased negative impact of currency translations.
The company expects organic sales growth of 6-8% for 2024 versus the 5-7% rise mentioned earlier. Although the company retained its guidance of a mid-single-digit negative impact of currency, it expects a greater negative impact within the range due to the recent adverse movements in the Mexican peso and the Brazilian real.
CL foresees gross profit margin expansion on both GAAP and adjusted basis, driven by continued pricing gains, benefits from revenue growth management initiatives and strength in the funding-the-growth program. On both GAAP and adjusted basis, the company anticipates higher advertising costs, both on a dollar basis and as a percentage of sales, for 2024. CL expects the tax rate for 2024 to be 23.5-24.5% on both a GAAP and adjusted basis.
Colgate expects adjusted earnings per share to increase 8-11% for 2024 compared with mid to high-single-digit growth stated earlier. On a GAAP basis, earnings per share are expected to rise in the double digits.
Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Vital Farms (VITL - Free Report) , Freshpet (FRPT - Free Report) and Post Holdings (POST - Free Report) .
Vital Farms, which offers a range of produced pasture-raised foods, currently flaunts a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vital Farms’ current fiscal year’s sales and earnings suggests growth of 24.9% and 66.1%, respectively, from the year-ago reported numbers.
Freshpet, a pet food company, presently sports a Zacks Rank #1. FRPT has a trailing four-quarter earnings surprise of 118.2%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 25% and 177.1%, respectively, from the year-ago period’s reported figure.
POST is a consumer-packaged goods holding company involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. Post Holdings currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for the company’s current financial-year sales and earnings suggests growth of 14.2% and 6.9%, respectively, from the year-ago period's reported figures. POST has a trailing four-quarter earnings surprise of 41%, on average.