Conservative · Stocks to Consider and Updates

Colgate Reports Mixed Results

New York-based Colgate-Palmolive Co, (NYSE: CL – $66.81) the world’s largest toothpaste maker, reported quarterly sales that fell below Wall Street estimates, as sales in Latin America declined by 7%. The maker of Irish Spring, Colgate oral care products, Softsoap and Hill’s Science Diet said total net sales for the second quarter rose 1.5% to $3.886 billion, but the figure was below analysts’ average estimates of $3.91 billion. Organic sales increased 0.5% world-wide, but was less than management’s expectations due to unit volume declines in many of the company’s emerging markets. North America net sales increased by 8%; Europe increased 6%; Asia-Pacific sales increased 1.5% and Africa/Eurasia increased 1%. The Hill’s Pet Nutrition segment saw a 3.5% sales increase.  The previously disclosed professional skin care acquisitions contributed 1.0% to net sales and unit volume growth in the quarter. Excluding charges resulting from the Global Growth and Efficiency Program in both periods and the benefit from a foreign tax matter in 2018, net income in second quarter was $673 million, an increase of 5% versus second quarter 2017, and earnings per share was $0.77, an increase of 7% and in line with Street views. Excluding charges, gross profit margin was 59.3%, a decrease of 140 basis points versus the year ago quarter as higher raw and packaging material costs were partially offset by cost savings from the company’s growth initiatives.

       The remaining half of 2018 will continue to be challenging as Colgate ups its advertising budget to spur growth. However, I am cautiously optimistic about the company’s long-term business prospects. Leadership’s focus on innovation augurs well for the years ahead and Colgate-Palmolive is well positioned in emerging regions. The shares yield 2.5% at current levels, which helps provide for a decent risk-reward investment scenario.

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