Will Stronger Than Expected Numbers Lead To A Rise In Colgate’s Share Price Post Earnings Release?

by Trefis Team
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Colgate-Palmolive
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Colgate-Palmolive (NYSE: CL) is slated to release its Q4 and full-year 2019 results on January 31, 2020. For FY 2019, Trefis estimates that the company will report revenue of $15.65 billion (vs. consensus estimate of $15.6 billion) slightly higher than $15.6 billion in 2018, due to an equal rise in both segments. The company is expected to report EPS of $2.91 (vs. consensus estimate of $2.83), higher than the $2.76 in 2018, due to revenue growing at a higher rate than expenses.
We believe that stronger-than-expected earnings for FY 2019 will very likely result in Colgate’s stock rising in price once earnings are announced. In fact, our forecast indicates that Colgate is valued at $72.90 a share, which is roughly 4% higher than its current price of $70.

Trefis shines the spotlight on key assumptions and data for Colgate, and our hypothesis lays out one possible set of expectations. You can chime in with your own expectations for Colgate’s FY19 earnings in our interactive dashboard.

A] Revenues are expected to marginally beat consensus estimates

  • Trefis estimates Colgate’s 2019 revenues to be $15.65 billion, marginally higher than the consensus estimate of $15.6 billion.
  • Revenue is expected to rise marginally by 0.3% from $15.6 billion in 2018 to $15.65 billion in 2019.
  • An equal rise in Oral, Personal & Home Care revenue and Hill’s Pet Nutrition, to drive a $50 million rise in Colgate’s total revenue for 2019.

A separate interactive dashboard for Colgate provides an in-depth view of Colgate’s revenue trend and segment-wise revenue performance, along with the forecast for 2019.

B] EPS likely to beat consensus estimate

  • Colgate’s 2019 earnings per share (EPS) is expected to be $2.91 per Trefis analysis, ~3% higher than the consensus estimate of $2.83 per share.
  • EPS is expected to increase ~5% from $2.76 in 2018 to $2.91 in 2019.
  • We forecast Colgate’s expenses to drop marginally in 2019, as opposed to a rise in revenue.
  • This will result in a growth in Colgate’s Net Income Margin figure from 15.4% in 2018 to 15.9% in 2019.

C] Stock price estimate ~4% higher than the market price

  • A trailing P/E multiple of 25.1x looks appropriate for Colgate’s stock, almost in line with the current implied P/E multiple of 24.8x.
  • Trefis’ forecast for Colgate’s 2019 earnings as well as P/E multiple, are slightly higher than market expectations, working out to a fair value of $72.90 for Colgate’s stock as opposed to the current market price of around $70.

Additionally, you can input your estimates for Colgate’s key metrics in our interactive dashboard for Colgate-Palmolive’s FY19 earnings and see how that will affect the company’s stock price.

 

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