Consumer products giant Colgate-Palmolive (CL) reported robust third-quarter earnings on Friday, surpassing market expectations and raising the lower end of its fiscal 2024 earnings and sales growth outlook. Despite the strong performance, shares dipped by 3% in early NYSE trading.
Chairman, President, and CEO Noel Wallace expressed confidence in the company’s direction, stating,
“Our strong results this quarter and year to date add to our confidence that we are executing the right strategies to deliver on our updated 2024 organic sales and Base Business earnings growth expectations, drive cash flow, and generate consistent, compounded earnings per share growth.”
For fiscal 2024, Colgate-Palmolive anticipates adjusted earnings per share (EPS) growth of 10% to 11%, up from the previously projected range of 8% to 11%.
Additionally, the company reaffirmed its expectations for gross profit margin expansion, increased advertising investments, and double-digit EPS growth.
Net sales growth guidance was also lifted to a range of 3% to 5%, compared to the earlier 2% to 5%. Organic sales growth expectations were increased from 7% to 8%, up from the prior forecast of 6% to 8%.
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Financial Performance Highlights
Colgate-Palmolive reported Q3 earnings of $737 million, a 4% rise from the $708 million earned in the same period last year. Earnings per share increased by 5%, coming in at $0.90, compared to $0.86 in the previous year.
On an adjusted basis, the company posted earnings of $0.91 per share, surpassing the consensus analyst estimate of $0.88 per share, according to data compiled by Thomson Reuters.
The company’s net sales rose 2.4% to $5.03 billion, also beating Wall Street’s estimate of $4.96 billion. Organic sales grew by 6.8%, driven by a combination of higher volumes and increased pricing.
Notably, Colgate-Palmolive’s gross profit margin expanded by 260 basis points to 61.1%, while its adjusted gross margin climbed 270 basis points to 61.3%.
Colgate-Palmolive Bets Big on Eco-Friendly Products to Meet Consumer Demand
Colgate-Palmolive continues to leverage its strong presence in emerging markets, which accounted for over half of its sales in 2023.
The company’s focus on expanding in fast-growing regions like Latin America, Africa, and Asia positions it well to capture demand from rising incomes and increasing consumption of consumer goods.
This diversified revenue base adds resilience to Colgate’s business, particularly in volatile economic conditions.
In addition to geographic expansion, Colgate-Palmolive has been actively investing in innovation and sustainability.
The introduction of recyclable toothpaste tubes and eco-friendly products aligns with shifting consumer preferences for sustainable goods, potentially driving future market share gains.
The company’s premium oral care offerings also position it well in a high-margin segment of the market.
Dividend King Status
Colgate-Palmolive’s long-standing commitment to shareholder returns remains a key attraction for investors. With 61 consecutive years of dividend increases, the company is part of the exclusive “Dividend Kings” group, known for its consistent and reliable shareholder payouts.
This track record, combined with the company’s share repurchase programs, makes it particularly appealing for income-focused investors.
Here’s What to Expect Going Forward
Despite the strong Q3 results and positive revisions to its 2024 outlook, Colgate-Palmolive’s shares traded lower on the NYSE, down -4.14% to $95.61 at the close of Friday trading. The decline may reflect broader market conditions or investor profit-taking following recent gains.
With its strong market presence, continued innovation, and increased focus on emerging markets, Colgate-Palmolive appears well-positioned to deliver long-term growth and sustained value to shareholders.
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