Colgate-Palmolive's earnings buoyed by higher prices, strength in Latin America

By Ciara Linnane

Company is planning to invest more on advertising to boost sales and improve margins

Colgate Palmolive Co.'s stock rose 2.7% Friday, after the maker of dental, personal care and pet food products posted better-than-expected fourth-quarter earnings and offered guidance that met consensus estimates.

The New York-based company (CL) posted net income of $718 million, or 87 cents a share, for the quarter, up from $5 million, or 1 cent a share, in the year-earlier period. Adjusted per-share earnings also came to 87 cents, ahead of the 85 cent FactSet consensus.

Sales rose to $4.950 billion from $4.629 billion, also ahead of the $4.893 billion FactSet consensus.

Sales were buoyed by higher prices, which helped boost gross profit margins by 400 basis points to 59.6%. Chief Executive Noel Wallace said the company has been working to boost margins and improve cash flow while still investing to support growth.

"We leveraged our strong margin performance to invest behind building our brands, with a 19% increase in advertising spending in 2023, and we expect higher levels of brand investment in 2024," Wallace said in a statement.

The company is now expecting 2024 sales to grow 1% to 4%, including a low-single-digit impact from foreign exchange movements. The current FactSet consensus implies growth of 3.3%.

See now: Procter & Gamble earnings boosted by higher pricing, sending stock up 5%

The company expects gross profit margin expansion, increased advertising investment and double-digit EPS growth. Adjusted EPS is expected to grow by a mid to high-single-digit percent. The current FactSet consensus implies growth of 8%.

By geography, sales rose 18% in Latin America, as prices rose an average of 8% and volumes were up 8%. In North America, sales rose 3.5% as prices rose 3% and volumes rose 0.5%.

European sales were up 10% as prices rose 7.5% and volumes fell 4%. The Asia Pacific region saw sales rise 0.5% as prices rose 5.5% and volumes fell 4.5%. Africa/Eurasia sales fell 4% as prices rose 9.5% and volumes rose 7.5%.

Hill's pet food sales were up 5% amid an 8.5% rise in prices and volumes fell 4%.

On the call with analysts, Wallace said the company is spending more on advertising for Hill's, given its low penetration of the market and overall weakness in the category.

Pet owners are switching to less expensive dry food from wet and are buying fewer treats, he said.

"We're not immune to the category softness, but if you take a step back and look at our principal retail environments, Pet Specialty, Neighborhood Pet, we're growing share nicely across all of those environments which means we're helping our retail partners grow in category dollars," he said, according to a FactSet transcript.

The company said it has a 41.1% share of the global toothpaste market and a 31.5% share of the manual toothbrush market.

The stock has gained 10% in the last 12 months, while the S&P 500 has gained 20.5%.

See also: Kimberly-Clark's stock dented by weaker-than-expected fourth-quarter earnings

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

01-26-24 1104ET

Copyright (c) 2024 Dow Jones & Company, Inc.