Colgate-Palmolive Beats Estimate - Analyst Blog

Colgate-Palmolive Company (CL) posted fourth-quarter earnings of $1.24 per share marginally outpacing the Zacks Consensus Estimate of $1.23 and prior-year quarter earnings of $1.21 per share.

For fiscal 2010, the company reported earnings per share of $4.31. It lags behind the Zacks Consensus Estimate of $4.81 due to a one-time non-cash after-tax charge of $271.0 million resulting from a required accounting change.

Global net sales fell 2.5% year-over-year to $3,978 million as pricing remained flat while unit volume rose 1%, countered by a negative foreign exchange impact of 3.5%. On an organic basis (excluding foreign exchange, acquisitions and divestitures), sales increased 1.0% in the quarter. Global net sales also fell short of the Zacks Consensus Revenue Estimate of $4,058 million.

For fiscal 2010, Global net sales increased by 1.5% to $15,564 million from the previous fiscal 2009. But it failed to surpass the Zacks Consensus Estimate of $15,647 million.

Gross profit decreased marginally by 3.0% to $2,350 million. Gross profit margin also declined by 40 basis points to 59.1% compared to the prior-year quarter, due to adverse foreign exchange translations, higher material costs and higher promotional investments.

Gross profit for the year came in at $9,204 million compared with $9,008 million reported a year ago. Gross margin improved by 30 basis points to 59.1% compared to the previous year's margin of 58.8%.

Colgate-Palmolive notified that its share of the global toothpaste market has increased to 44.2% year-to-date, led by better performance across Brazil, China, India, Venezuela and the United Kingdom. Colgate's market share in manual tooth brushes has increased to 31.6%.

Segment Discussion

North America sales (18.0% of the total sales) declined 2.0% in the quarter, primarily due to 4.0% lower pricing, partially offset by a 1.5% unit volume growth and 0.5% favorable foreign exchange. On an organic basis, sales declined by 2.5%. Operating profit decreased by 8.0% due to increased promotional investments and higher material costs, partially offset by cost-saving initiatives.

Latin Americasales (29.0% of the total sales) declined 7.5% during the quarter as unit volume declined by 1.5%. Volume gains in Mexico, Colombia, Argentina, Dominican Republic and Central America, were fully offset by a volume decline in Venezuela.

In addition, pricing contributed 5% to the top-line, countered by a negative foreign exchange impact of 11.0%. On an organic basis, sales increased by 3.5%, whereas operating profit slipped 14% during the quarter.

Europe/South Pacific sales (20.0% of the total sales) dropped 7.0% as pricing was down 3.0% and foreign currency translation made a negative contribution of 4.0%. Unit volume remains flat during the quarter as the volume gains in the GABA business, the U.K., Germany, Denmark and Australia were offset by volume declines in France, Portugal and Romania. On an organic basis, sales fell 3.0%, whereas operating profit plunged 19% in the quarter.

Greater Asia/Africa sales (19.0% of the total sales) climbed 11.0%, with increase in volume by 9.0%, primarily led by volume gains in India, the Greater China region, Philippines, Russia and South Africa. Pricing dropped marginally by 1.0% but foreign currency translation made a positive contribution of 3.0%. On an organic basis, sales grew 8.0%, whereas operating profit rose 11.0%.

Hill's sales (14.0% of the total sales) tumbled 2.0%. Unit volume fell 1.0%, due to volume declines across Russia, Germany and the United Kingdom. On an organic basis, sales slipped 2.0% and operating profit decreased 1%.

Other Financial Details

Colgate-Palmolive ended the quarter with cash and cash equivalents of $490.0 million, total debt of $3,424 million and shareholders' equity of $2,675 million. Year-to-date, net cash provided by operating activities came in at $3,211.0 million.

Colgate-Palmolive, which competes with Procter & Gamble Company (PG) and Church & Dwight Company Inc. (CHD), maintains a Zacks #3 Rank, which translates into a short-term Hold" recommendation. However, our long-term recommendation for the stock remains "Neutral".

 
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