Colgate-Palmolive (CL) Q2 Profits Tick Higher, But Trends Slow Sending Stock In Free-Fall

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CL Hot Sheet

EPS Growth %: +6.9%

Financial Fact:
Provision for income taxes: 295M

Today's EPS Names:
TARO, BRLI, TLB, More

Colgate-Palmolive Co. (NYSE: CL) posted weaker-than-expected sales in the second quarter saying that it saw a larger than expected hit from the currency devaluation in Venezuela, as its shares were sent tumbling.

The consumer-goods maker of products like toothpaste and dish soap reported second quarter earnings of $603 million or $1.17 per share, up from $562 million or $1.07 per share in the same quarter last year.

Revenue for Colgate rose 2 percent to $3.81 billion in the three month period ended June 30 from $3.75 billion last year. Volume of goods sold in the period rose 3 percent as global pricing increased 0.5 percent.

On average, analysts had been looking for earnings of $1.16 per share from the company on sales of $3.94 billion.

"Overall, we are very pleased to have delivered solid results this quarter, despite heightened competitive activity and difficult economic conditions around the world," Ian Cook, Colgate Chairman, President and Chief Executive Officer, said. "It's great that even after higher levels of commercial investment worldwide, operating profit and net income both increased during the quarter, both absolutely and as a percent to sales. "Our business fundamentals are strong and we have a very full pipeline of new products planned for launch in the second half of the year with continued strong levels of commercial spending to support them."

Colgate added that its global share of the toothpaste market rose to 44.4 percent year to date, while its share of the toothbrush market improved to 31.6 percent.

Looking forward, the company sees double-digit earnings growth for the full year.

Commenting on the reports, analysts at Deutsche Bank said, "Latin America trends remain strong excluding Venezuela but after years of outsized organic growth and tough comparisons, trends are clearly slowing particularly in North America and Europe, with Hills challenges continuing. While Colgate is an extremely well managed company, we believe valuation is fair and stepped up reinvestment is required to continue to drive industry leading growth." The firm maintained their Hold rating and $84 price target.

Goldman Sachs called the quality of the quarter "low" with with sales and gross margin light versus the consensus. The firm noted that organic sales growth of 3.5% was below their forecasted acceleration to
7%.

Shares of Colgate are down 8.01 percent to $77.14 in midday market movement Thursday.

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