Colgate-Palmolive Company ( CL ), a global dealer in
consumer goods, reported first-quarter 2013 adjusted earnings of
$1.32 per share, rising 6% from the year-ago quarter's adjusted
earnings of $1.24 and in line with the Zacks Consensus
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Global sales of $4,315 million increased nearly 2.7% from the
prior-year quarter's level of $4,200 million, primarily benefiting
from a 4.0% increase in global unit volumes and 1.5% upside in
pricing, partially offset by a negative impact of 3.0% from foreign
exchange. Quarterly revenue also surpassed the Zacks Consensus
Estimate of $4,299 million.
On an organic basis (excluding foreign exchange, acquisitions and
divestitures), the company recorded sales growth of 6%.
Adjusted gross profit margin expanded 40 basis points (bps) to
58.6%, driven by increased prices as well as cost savings from the
company's funding-the-growth initiatives. This was offset in part
by higher raw and packaging material expenses and increased cost of
sales in Venezuela due to currency devaluation.
Adjusted selling, general and administrative expenses, as a
percentage of revenue grew 40 bps to 35.4% on account of a rise in
advertising and overhead costs as the company ramped up investments
in customer development initiatives.
First-quarter adjusted operating profit of $985 million climbed 4%
compared to the year-ago period, while operating margin expanded 20
bps to 22.8%.
Colgate-Palmolive's market share of global toothpaste and manual
toothbrushes reached 45.6% and 33.4%, respectively. Global
toothpaste and manual toothbrushes share represented an increase of
0.1 and 0.4 share points from the year-ago period.
North America sales (18% of total sales) rose
5.5% in the quarter, driven by a 2.0% upside in prices and a 3.5%
rise in unit volume. On an organic basis, sales increased
Segment operating profit surged 22% to $215 million, while
operating margin expanded nearly 370 bps to 28.1%. The
year-over-year increase in operating profit margin was primarily
driven by increased gross profit margin, offset by higher selling,
general and administrative expenses as a percentage of net
Latin America sales (28% of total sales) inched
up 1.0% year over year, primarily driven by a 3.0% increase in
pricing and 5.5% volume growth, partially offset by negative
foreign exchange impact of 7.5%. Volume gains were most prominent
in Mexico, Brazil, Venezuela and the Southern Cone region. On an
organic basis, sales increased 9%.
However, operating profit declined 11% to $312 million from the
prior-year quarter. Moreover, operating margin contracted 340 bps
to 25.7%, primarily due to lower gross profit margin and increased
selling, general and administrative expenses as a percentage of
Europe/South Pacific sales (20% of total sales)
declined 0.5% year over year, driven by flat unit volume and
pricing as well as a 0.5% negative impact from foreign currency
exchange. Volume gains were primarily led by better performance in
Australia, Holland and Germany, offset by declines in Greece and
the United Kingdom. Organic sales for the region were up
Operating profit increased 9% year over year to $200 million.
Furthermore, the operating profit margin in the region expanded 220
bps to 23.6%, driven by higher gross profit margin and lower
SG&A expenses as a percentage of sales.
Greater Asia/Africa sales (22% of total sales)
climbed 8.5%, with an 11% increase in unit volume, offset by a 1%
decline in pricing and 1.5% negative impact from foreign currency.
Volume growth was primarily led by gains in India, Russia, the
Greater China region, Turkey, the Philippines and South Africa. On
an organic basis, sales grew 10.0%.
Operating profit jumped 13% to $248 million on account of improved
gross profit, offset by increased selling, general and
administrative expenses, as a percentage of sales. Operating margin
expanded 100 bps to 26.0%.
Hill's Pet Nutrition sales (12% of total sales)
inched down 1.5%. Unit volume decreased 3.0% as volume declines in
the U.S., Europe and Japan overshadowed the volume gains in Russia,
Canada, Australia and Brazil. Pricing had a 3.5% positive impact on
sales growth, while foreign exchange negatively impacted sales by
2.0%. On an organic basis, sales rose marginally by 0.5% from the
Operating profit dipped 8% to $136 million. However, the operating
profit margin contracted 180 bps to 25.5%, since the rise in gross
profit margin was more than offset by an increase in selling,
general and administrative expenses, as a percentage of net
Other Financial Details
Colgate-Palmolive ended the quarter with cash and cash equivalents
of $932 million, total debt of $5,357 million and shareholders'
equity of $1,772 million. Net cash provided by operating activities
came in at $777 million for the first quarter.
Looking ahead, Colgate-Palmolive anticipates its growth momentum
to continue into fiscal 2013 as it remains on track with its global
restructuring program. Further, the company's stringent focus on
the funding-the-growth programs and strategic worldwide pricing
initiatives should help boost its bottom line.
As a result, the company expects strong organic sales as well as
gross margin expansion in fiscal 2013. Further, the company
projects 5.5% to 6.5% growth in earnings per share for fiscal 2013.
The company's earnings for the year are expected to be impacted by
currency devaluation in Venezuela throughout 2013. The company
estimates an impact of about 5 cents to 7 cents in every quarter in
2013 from the currency devaluation.
Other Stocks to Consider
Colgate-Palmolive carries a Zacks Rank #3 (Hold). Other stocks in
the same industry that are worth considering include
Lifeway Foods Inc. ( LWAY ),
Flowers Foods Inc. ( FLO ) and
Carriage Services Inc. ( CSV ), all of which
carry a Zacks Rank #1 (Strong Buy).