Conservative · Stocks to Consider and Updates

Colgate Posts Weaker than Expected Results; Lowers Outlook

Shares of New York-based Colgate-Palmolive Co, (NYSE: CL – $73.15) are falling about 5% after posting revenue which fell short of analysts’ expectations for its fourth quarter, despite rising from a year ago and bolstered by growth in Latin America and the U.S., its two biggest markets. The company, whose products include toothpaste, shampoos, soaps and pet nutrition, generated net sales of $3.89 billion in the quarter, up 4.5% from $3.72 billion in the prior-year period, but shy of analysts’ estimates of $3.94 billion.  Adjusted earnings per share were flat year-on-year at $0.75 and in line with consensus. The largest part of revenue in the company’s oral, personal and home care segment came from Colgate’s operations in Latin America, where sales climbed to $976 million from $940 million a year earlier and in North America, where sales rose to $798 million from $790 million. Revenue also rose in all the company’s other geographical regions, including Asia-Pacific, Europe and the area the company refers to as ‘Africa/Eurasia’. Sales from the Hills pet nutrition segment rose to $593 million from $579 million in the prior-year period.

       Looking ahead to 2018, the company said: “Based on current spot rates, we expect a mid-single-digit net sales increase and low to mid-single-digit organic sales growth in 2018, with improvement in organic sales growth versus the second half of 2017”. Earnings for all of this year may not exceed $3.12, putting a high valuation on the stock of 23, as traders believe that Colgate is a prime takeover candidate. A buyout notwithstanding, the shares, yielding 2%, are backed by strong finances and a worldwide global footprint that should continue to grow over time and positions look attractive on a risk-adjusted basis.

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