Conservative · Stocks to Consider and Updates

Colgate Results Disappoint; Lowers Guidance

Shares of New York-based Colgate-Palmolive Co. (NYSE: CL – $60.02) are trading lower by about 6% in today’s market after the consumer products company reported third-quarter revenue that missed expectations. Net income for the quarter totaled $523 million down from $607 million last year. Adjusted earnings were $0.72 vs. $0.73 a year ago and in line with consensus. Sales of $3.85 billion were down from $3.97 billion and Street estimates were $3.89 billion. Pricing increased 1% from a year ago, but foreign-exchange shaved off 4% of sales. Professional skin care acquisitions contributed 1.5% in net sales and unit volume growth. Total North American sales increased 8% from last year, but sales in Latin America declined 13%. Trade inventory in China also held sales in check. In the quarter Colgate experienced higher raw material and packaging costs, offset by savings from pricing and other initiatives. Hence, the company’s operating profit margins – a key metric – fell by 190 basis points to 23.4% in the third quarter. 

      The producer of Colgate dental care products, Irish Spring and Hills Pet nutrition expects fourth-quarter sales to decrease in the low-single digits as unfavorable foreign-exchange offsets organic sales growth. The next few months will continue to be challenging, but the long-term picture is more attractive. While they have been a soft spot for the company of late, emerging markets represent the primary growth driver for Colgate. Additionally, the restructuring efforts should be behind the company and, as a result, it ought to be better positioned from an operational standpoint. The good-quality shares yield 2.6%

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