Key Takeaways From Colgate-Palmolive’s Q2 Earnings

by Trefis Team
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Colgate Palmolive (NYSE:CL) reported weaker-than-expected fiscal second quarter earnings, as its earnings per share came in line but revenue missed expectations. The company’s stock slid slightly after the result’s announcement.

Key takeaways from the Q2 results are below:

  • Colgate’s net sales were down 0.5% year-over-year( y-o-y) in the quarter, as 1% y-o-y pricing growth was offset by a 1% y-o-y volume decline and slightly negative foreign exchange.
  • The company’s organic sales growth was flat y-o-y in the second quarter, driven by weakness in categories and macroeconomic uncertainties.

  • On a non- GAAP basis, the company’s gross profit margin increased 50 basis points (bps), driven by cost savings from its “Funding the Growth” initiative as well as its Restructuring Program, and higher pricing. Its operating profit margin was down 10 bps y-o-y in Q2 to 26%, primarily due to growth in advertising investments and overhead expenses.
  • The company saw a further slowdown in demand in several markets, including the United States, Southeast Asia and the South Pacific. However, the company witnessed strong sales growth in Latin America, driven by a balance of volume and pricing.

Going forward, the company has lowered its full year earnings guidance to down mid-single digits as compared to the previous guidance of flat EPS. Also, the company now expects its organic sales growth to be in the low single-digits versus its previous guidance of modestly below the historical long-term range of 4% to 7%. In addition, the company expects to grow its gross margin further in the second half of the year, due to fewer impacts from raw material costs and greater benefits from the Funding the Growth initiative. The key factors which could drive Colgate’s performance in the second half of 2017 remain investments in R&D, advertising spend and variations in consumer demand in North/South America and Europe.

See our complete analysis for Colgate-Palmolive

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