Colgate-Palmolive Stock Slips After Q2 Earnings: What's Going On?

Colgate-Palmolive Company CL reported second-quarter FY23 sales growth of 7.5% year-on-year to $4.82 billion, beating the consensus of $4.67 billion. Organic sales increased by 8%. 

Non-GAAP EPS of $0.77 beat the analyst consensus of $0.75.

"Gross profit margin, operating profit margin, operating profit, net income, earnings per share and free cash flow all increased versus the year ago quarter," said Noel Wallace, Chairman, President and Chief Executive Officer.

Total Oral, Personal and Home Care net sales increased by 5.3% to $3.77 billion. Pet Nutrition sales rose 16.2% to $1.06 billion.

Gross profit increased 9.1% to $2.79 billion, while the margin expanded 80 basis points to 57.8%.

Operating profit increased 10.2% to $974 million while operating margin expanded 50 basis points to 20.2%.

The company exited the quarter with $819 million in cash and equivalents, with total debt of $8.99 billion.

The company sees "strong investment levels" to continue in the back half of the year to deliver balanced organic sales growth.

"We believe we are well positioned to continue to drive top and bottom line growth through the balance of 2023 as our gross margin expansion, driven by sustained pricing and the benefits from funding-the-growth and other productivity initiatives, allows us to invest behind our brands," Wallace added.

Outlook: Colgate sees FY23 net sales growth of 5%-8% (prior view 3%-6%), including the benefit from acquisitions of pet food businesses and a low-single-digit negative impact from foreign exchange.

The company now expects organic sales growth of 5%-7% (prior view: 4%-6%).

On a non-GAAP (Base Business) basis, the company still expects gross profit margin expansion and increased advertising investment. 

CL now expects EPS growth to be at the high end of mid-single-digits (prior view: mid-single-digit EPS growth).

Price Action: CL shares are trading lower by 1.58% at $75.89 in premarket on the last check Friday.