Colgate (CL) Earnings in Line, Sales Miss Estimates in Q4

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Colgate-Palmolive Company CL has reported fourth-quarter 2021 results, wherein earnings were in line with the Zacks Consensus Estimate, while sales missed the same. Both top and bottom lines increased year over year. Results gained from higher pricing and stable volume.

Management has highlighted that the company witnessed strong momentum across its businesses, particularly oral care and pet nutrition categories. Colgate anticipates uncertainties from the COVID-19 pandemic, supply-chain disruptions, increases in raw material and logistics costs, and volatility in consumer demand and currencies to continue in 2022. Consequently, it expects funding growth and revenue growth management initiatives, including higher pricing, to be more relevant.

Shares of the company slipped 3% in the pre-market session, following the earnings release. It looks like the company’s in-line earnings results failed to impress investors, as sales and margins were soft. Moreover, Colgate expects the pandemic and supply-chain-related uncertainties to continue.

Shares of this Zacks Rank #4 (Sell) company have gained 8.6% in the past three months compared with the industry’s growth of 7%.

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Quarter in Detail

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On a Base Business basis (adjusted non-GAAP), earnings of 79 cents per share rose nearly 3% from the prior-year quarter’s levels and were in line with the Zacks Consensus Estimate. On a GAAP basis, earnings declined 76% to 18 cents per share in the quarter under review. The variance mainly resulted from goodwill and intangible asset impairment charges stemming from the Filorga skin health business. The impact was mainly driven by the COVID-related influences on the duty-free, travel retail and pharmacy channels.

Net sales of $4,403 million increased 1.8% from the year-ago quarter’s levels but marginally missed the Zacks Consensus Estimate of $4,436 million. On an organic basis, the company’s sales advanced 3%. This marked the 12th successive quarter of organic sales growth within or beyond its target of 3-5%. Colgate’s top-line performance was driven by increased pricing. Total volumes remained flat on both reported and organic basis, and pricing was up 3%. Unfavorable currency impact was 1%.

The gross profit of $2,559 million declined 3.2%. The gross profit margin contracted 300 basis points (bps) to 58.1%, both on a GAAP and an adjusted basis.

ColgatePalmolive Company Price, Consensus and EPS Surprise

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Selling, general & administrative (SG&A) expenses increased 2.1% year over year to $1,598 million. As a percentage of sales, SG&A expenses declined 150 bps to 36.3%.

The adjusted operating profit was $936 million, down 3% year over year, while the adjusted operating margin contracted 110 bps to 21.3%.

Colgate’s global market share in the manual toothbrushes category has reached 30.9% year to date. The company continued with its leadership position in the global toothpaste market, with a market share of 39.4% year to date.

Segmental Discussion

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North America’s net sales (21% of total sales) dropped 1% year over year. The unit was affected by a 1% decline in volume and a 0.5% impact from pricing, offset by a 0.5% favorable currency impact. Organic sales fell 1.5% on soft personal care and home care sales, as the demand for certain categories that witnessed a spike due to COVID-19 subsided from last year. Year to date, the company’s share in the toothpaste market is 34.3% and in the manual toothbrush market is 39.5% in the United States.

Latin America’s net sales (21% of total sales) rose 3.5% year over year on 7% pricing gains, offset by a 1% decline in volume and a 2.5% impact from adverse currency. On an organic basis, sales were up 6%, led by growth in Brazil, Argentina, Columbia and Mexico.

Europe’s net sales (16% of total sales) declined 6% year over year on a reported basis. The unit was affected by a 3% decline in volume, a 0.5% impact from pricing, and a 2.5% negative currency impact. Organic sales and volumes were down 3.5% and 3%, respectively. Organic sales were adversely impacted by declines in the Filorga duty-free business, and soft sales in Germany and France, partially offset by organic sales growth in Poland.

The Asia Pacific segment’s net sales (16% of total sales) increased 0.5% year over year, owing to 0.5% volume growth and a 1% increase in pricing, offset by a 1% impact from adverse currency. Volumes also improved 0.5% on an organic basis. Organic sales improved 1.5%, driven by gains in Indonesia, India and the Philippines.

Africa/Eurasia’s net sales (6% of total sales) increased 2% year over year due to an 8.5% increase in pricing, offset by a 5.5% decline in volume and a 1% unfavorable currency impact. Organic sales for the segment grew 3%, driven by growth in South Africa, Turkiye and the Saudi Arabia/Gulf States region.

Hill’s Pet Nutrition’s net sales (20% of total sales) improved 12% from the year-ago quarter’s levels on a reported basis and 13% on an organic basis. Results gained from a 7% increase in unit volumes (both reported and organic) and 6% pricing growth, offset by a 1% adverse currency impact. Organic sales were aided by gains in the United States and Europe.

Other Financial Details

Colgate ended 2021 with cash and cash equivalents of $832 million, and total debt of $7,245 million. Net cash provided by operating activities was $3,325 million as of Dec 31, 2021.

Outlook

Management issued guidance for 2022. It anticipates net sales growth of 1-4%, with a low-single-digit unfavorable currency impact. Organic sales are likely to rise 3-5%, which is within its long-term target range. Colgate expects gross margin expansion on both GAAP and adjusted basis. Advertising investments are expected to reflect a rise.

The company anticipates earnings growth in double-digits, on a GAAP basis. On an adjusted basis, earnings are expected to reflect low to mid-single-digit growth.

Consumer Staples Picks You Can’t Miss

We have highlighted three better-ranked companies in the Consumer Staples sector, namely United Natural Foods UNFI, Helen of Troy HELE and Medifast MED

United Natural, a leading distributor of natural, organic, and specialty food and non-food products in the U.S. and Canada, presently flaunts a Zacks Rank #1 (Strong Buy). The UNFI stock has rallied 34% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for United Natural’s sales and EPS for the current financial year suggests growth of 5.1% and 8.8%, respectively, from the year-ago levels. UNFI has a trailing four-quarter earnings surprise of 35.4%, on average.

Helen of Troy, a leading consumer products player, presently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of HELE have declined 15.7% in the past year.

The Zacks Consensus Estimate for Helen of Troy’s sales and EPS for the current financial year suggests respective growth of 0.8% and 0.6% from the year-ago period’s reported figures. HELE has an expected EPS growth rate of 8% for three to five years.

Medifast, a leading manufacturer and distributor of clinically-proven healthy living products and programs, presently carries a Zacks Rank #2 (Buy). Shares of MED have declined 19.4% in the past year.

The Zacks Consensus Estimate for Medifast’s sales and EPS for the current financial year suggests respective growth of 63% and 49.3% from the year-ago period’s reported figures. MED has a trailing four-quarter earnings surprise of 17.3%, on average.


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ColgatePalmolive Company (CL): Free Stock Analysis Report

 

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Helen of Troy Limited (HELE): Free Stock Analysis Report

 

MEDIFAST INC (MED): Free Stock Analysis Report

 

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