Conservative · Stocks to Consider and Updates

Colgate-Palmolive Revenue Falls on Currency Challenges; Earnings Beat Consensus

CLExcluding charges resulting from the restructuring, tax matters and devaluation in Venezuela’s currency, net income in the second quarter for Colgate-Palmolive Co. (NYSE: CL – $ 73.26) was $631 million, a decrease of 1% versus second quarter 2015, equal to earnings per share of $0.70, even with second quarter 2015 and a penny ahead of analysts’ estimates. Excluding special items in both periods, earnings per share increased double-digit on a currency-neutral basis and C-P’s gross profit margin topped 60.2%, an increase of 190 basis points versus 2015.  Revenue fell 5.4% to $3.85 billion in the quarter, just below analysts’ estimates for $3.86 billion. Geographically:

  • North America net sales increased 2.0% in the period and unit volume increased 3.5%
  • Latin America net sales decreased 16.5%. Unit volume decreased 13.5% with 9.5% higher pricing, while foreign exchange was negative 12.5%. Excluding the impact of the deconsolidation of the Company’s Venezuelan operations, unit volume was even with the year ago quarter as volume gains in Mexico and Central America were offset by volume declines in Brazil and Argentina. Organic sales for Latin America increased 9.5%.
  • Net sales in Europe increased 0.5% as unit volume increased 4.0%, pricing decreased 3.0% and foreign exchange was negative 0.5%. Volume gains were led by the United Kingdom, Italy and Poland, partly offset by volume declines in France.
  • Asia-Pacific net sales decreased 7.0% with unit volume decreasing 3.0% on a 1% pricing increase. Foreign exchange was negative 5.0%. Volume gains led by India and the Philippines were partially offset by volume declines in the Greater China region. Organic sales for Asia-Pacific increased 2.0%.
  • Net sales in the Africa/Eurasia region decreased 6% and unit volume decreased 1.5%, pricing increased 9.0% and foreign exchange was negative 13.5%.
  • Worldwide Hill’s Pet Nutrition sales increased 3.5% in second quarter. Unit volume increased 1.5% with 2.5% higher pricing, while foreign exchange was negative 0.5%.

       Looking ahead, the company continues to plan for a year of gross margin expansion and expects earnings per share to be flat with 2015 at about $2.80 per share. Conservative accounts will like the rock-solid financials of this company, and positions can be maintained.

CL

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