Colgate-Palmolive Co. (CL), a global dealer in consumer goods, reported fourth-quarter 2014 adjusted earnings of 76 cents per share, a penny ahead of the Zacks Consensus Estimate and up 1% year over year.
Shares of Colgate soared about 2.9% in the pre-market trading following the announcement of the company’s fourth quarter results.
Including one-time items, earnings came in at 68 cents per share, down 13.3% from 60 cents in the year-ago quarter.
Global sales of $4,221 million dipped nearly 3% from the year-ago figure of $4,361 million, as benefit of 2.5% growth in volume and 3.5% rise in prices were more than offset by a negative impact of 9% from currency fluctuations. Moreover, quarterly revenues missed the Zacks Consensus Estimate of $4,228.8 million.
On an organic basis (excluding foreign exchange, acquisitions and divestitures), the company recorded sales growth of 6%.
Adjusted gross profit margin was 58.8%, down 30 bps as the benefit from cost saving initiatives under funding-the-growth and 2012 Restructuring Program as well as higher pricing were more than offset by increase in raw material and packaging costs.
Adjusted selling, general and administrative (SG&A) expenses, as a percentage of revenues, fell 100 basis points (bps) to 33.5% from the year-ago quarter, mainly due to lower overhead expenses and advertising investment, both as a percentage of sales.
In the quarter, adjusted operating profit of $1,080 million increased 1% from the year-ago period. Operating margin improved 100 bps to 25.6%, mainly benefitting from lower SG&A expenses as a percentage of revenues, partially offset by reduced adjusted gross margin.
On a year-to-date basis, Colgate’s market share of global toothpaste and manual toothbrushes reached 44.5% and 33.4%, respectively. Additionally, the company’s mouthwash business made significant progress, with its global market share reaching a record 16.9% in the year-to-date period, a 10 bps improvement from the prior-year quarter.
Q4 Segment Discussion
North America sales (18% of total sales) rose 1% in the quarter, driven by a 3% rise in unit volume, partly offset by negative impact of 1% each from lower pricing and foreign exchange. On an organic basis, sales increased 2%.
The segment’s operating profit declined 1% to $239 million while operating margin contracted 60 bps to 30.6%. The decline in operating margin was mainly due to decrease in gross margin, partly offset by improved SG&A expenses as a percentage of net sales.
Latin America sales (28% of total sales) declined 6% year over year, as the benefit of an 11.5% increase in pricing and 1% unit volume growth was more than offset by a negative impact of 18.5% from foreign exchange. Volume gains were most prominent in Venezuela and Central America, offset by declines in Brazil. On an organic basis, sales increased 12%.
Operating profit decreased 4% to $348 million, while as a percentage of sales it expanded 50 bps to 29.2%, primarily due to reduced SG&A expenses as a percentage of sales, partially offset by lower gross profit margin.
Europe/South Pacific sales (20% of total sales) dipped 7.5% year over year, due to negative impact of 2% from lower pricing and 8% from foreign currency translation, offset slightly by a 2.5% rise in unit volume. Volume gains were primarily led by the United Kingdom and Germany. Organic sales for the region were up 1%.
Operating profit fell 2% year over year to $196 million. However, operating margin for the region expanded 140 bps to 25.1%, primarily on the back of higher gross profit margin, offset by increase in SG&A expenses as a percentage of sales.
Asia sales (14% of total sales) rose 4.5% owing to 4.5% increase in unit volume and 2% upside in pricing, offset by negative impact of 2% from foreign exchange. Volume growth was primarily attributed to gains in India, Greater China region and the Philippines. On an organic basis, sales grew 6%.
Operating profit rose 8% to $178 million. Operating margin expanded 90 bps to 29.7%, on account of higher gross margin and lower SG&A expenses as a percentage of sales.
Africa/Eurasia sales (7% of total sales) dropped 10% year over year due to a negative impact of 17.5% from foreign currency exchange, offset slightly by 5% growth in unit volume and 2.5% increase in prices. Volume gains were primarily led by South Africa and the Sub-Saharan Africa regions. Organic sales for the region rose 7.5%.
Operating profit fell 24% year over year to $58 million in the quarter, while as a percentage of sales it contracted 350 bps to 19.9%. The decrease was mainly due to lower gross profit margin, partially offset by reduced SG&A expenses as a percentage of sales.
Hill’s Pet Nutrition sales (13% of total sales) were down 1%. Pricing had a 3.5% positive impact on sales growth, while foreign exchange negatively impacted sales by 5%. Unit volume improved 0.5% due to volume gains in Russia, offset by declines in Japan. On an organic basis, sales rose 4% from the year-ago quarter.
Operating profit was flat year over year at $153 million, while operating profit margin expanded 40 bps to 26.6%. The rise in operating profit margin was due to decline in SG&A expenses as a percentage of sales and Other (income) expense, net, which was partially offset by lower gross margin.
Full-Year Synopsis
For 2014, the company’s adjusted earnings came in at $2.93 per share, up 3% from 2013 and a penny ahead of the Zacks Consensus Estimate. Revenues for the year fell approximately 1% to $17,277 million, while organic sales grew 5%. The company’s top line missed the Zacks Consensus Estimate of $17,292 million.
Other Financial Details
Colgate, which competes with The Procter & Gamble Co. (PG) and Unilever plc (UL), ended the year with cash and cash equivalents of $1,089 million, total debt of $6,148 million and shareholders’ equity of $1,145 million.
Net cash provided by operating activities came in at $3,298 million for fiscal 2014.
Other Stocks to Consider
Currently, Colgate carries a Zacks Rank #4 (Sell). A better-ranked stock in the same industry is Clorox Co. (CLX), holding a Zacks Rank #2 (Buy).
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