Colgate-Palmolive Company CL delivered mixed results for fourth-quarter 2024. While the company's earnings exceeded the Zacks Consensus Estimate, its revenues fell short of expectations. Despite the earnings beat, investor sentiment remained cautious, leading to a 3.1% decline in the stock price since the company announced its results on Jan. 31.
Shares have also underperformed the broader industry’s growth of 0.3%, the Consumer Staples sector’s rise of 1.5% and the S&P 500’s rally of 0.3% in the same period.
CL Stock's Price Performance
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With Colgate-Palmolive’s earnings now in focus, investors must decide whether to buy more shares, retain positions, or reduce the exposure of the stock.
Highlighting CLX’s Q4 Results
Colgate is witnessing solid business momentum, which led to higher organic sales in fourth-quarter 2024. On an organic basis, the company’s sales advanced 4.3%, backed by a 2.5% increase in volume and a 1.8% improvement in pricing. Also, accelerated revenue-growth management plans have been aiding Colgate’s organic sales for a while now.
Colgate ended the quarter with organic sales growth, robust volume and pricing performance and gross profit margin expansion. The company projects organic sales growth within its long-term target range of 3-5%, factoring in the planned exit from private-label pet nutrition throughout 2025.
However, Colgate has been facing inflationary pressures and a challenging macroeconomic environment for quite some time. Rising raw material and packaging costs continue to weigh on the company's profitability. Additionally, foreign currency fluctuations are acting as significant headwinds, with the sales outlook for 2025 reflecting a mid-single-digit negative impact from unfavorable currency exchange rates.
Looking ahead, the management expects 2025 net sales to remain relatively flat, with a mid-single-digit negative impact from unfavorable currency exchange rates. On an adjusted (Base Business) basis, Colgate foresees gross profit margin expansion, with advertising investment expected to remain stable or increase slightly in both dollar terms and as a percentage of sales. The company also projects low to mid-single-digit growth in adjusted EPS for 2025.
How Consensus Estimates Stack Up for Colgate Post Q4 Earnings
Following the soft fourth quarter performance, the Zacks Consensus Estimate for CL’s EPS has seen downward revisions. In the past 30 days, analysts have decreased estimates for earnings for 2025 and 2026 by 1.8% to $3.76 and 3.1% to $4.05 per share, respectively. The estimates suggest year-over-year increases of 4.4% and 7.5%, respectively.
Analysts have lowered their estimates 4.3% to 89 cents per share for the first quarter of 2025, owing to slower growth and increased cost pressures.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Why CL Remains a Compelling Stock for Investors
Colgate’s strategy of offering core and premium innovation, driving its advertising spend and scaling capabilities to boost brand strength and increase household penetration remains on track. It is also focused on the premiumization of its Oral Care portfolio through major innovations. Backed by premium innovation, products including CO. by Colgate, Colgate Elixir toothpaste and Colgate enzyme whitening toothpaste have been performing well.
Colgate has been gaining from continued strong pricing and the benefits of funding the growth and other productivity initiatives. The company has been implementing aggressive pricing for the last few quarters, which boosted margins in fourth-quarter 2024. In the fourth quarter of 2024, pricing improved 1.8% year over year in the reported quarter, backed by positive pricing across its few divisions.
The company is focused on investing in scaling its capabilities in key areas such as digital, data and analytics to enhance competitive advantages and drive profitability. Colgate’s strategy of offering core and premium innovation, driving its advertising spend and scaling capabilities to boost brand strength and increase household penetration remains on track.
Investment Opinion on CL Stock
Reflecting the soft Q4 performance and muted guidance for 2025 indicates that the CL stock lacks near-term growth potential. However, its long-term strategies provide a solid foundation for recovery. Current investors should retain their positions in CL stock, while new investors might wait for a more favorable entry point. Colgate currently carries a Zacks Rank #3 (Hold).
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