Market Overview

Colgate-Palmolive Earnings Preview: Q1 EPS, Sales Expected to Be Higher

Colgate-Palmolive (NYSE: CL), shares of which are trading near a multiyear high, is scheduled to report first-quarter 2012 results tomorrow April 26, with a conference call and webcast at 11 AM Eastern.

Investors will be looking for Colgate to get back on track after a profit decline in the fourth quarter that broke a three-quarter growth streak. Last week's earnings beat by Kimberley-Clark (NYSE: KMB), which likewise has seen strength in emerging markets, and the resulting boost in its share price could bode well for Colgate.

See also: Kimberly-Clark Posts Higher Q1 Profit

Expectations

Analysts predict that Colgate-Palmolive will report per-share earnings of $1.24 for the quarter and say that revenue totaled $4.2 billion. That would be up from $1.16 per share and $4.0 billion in sales in the same period of last year. The EPS estimate has inched up a penny in the past 60 days. And note that analysts' consensus EPS estimates have come within a penny or two of actual results in the past eight quarters.

Back in its fourth-quarter report, the company said earnings climbed 5% year-over-year to $1.30 a share. Revenue was 5% higher to $4.2 billion, which fell just short of expectations. Colgate said strong sales in emerging markets were partially offset by currency issues, a problem shared by other personal-care-product makers like Kimberly-Clark and Johnson & Johnson (NYSE: JNJ).

Looking ahead to the current quarter, analysts so far expect to see sequential and year-over-year growth of both per-share earnings and revenues. And the full-year forecast has EPS up almost 7% from the previous year and revenue more than 3% higher.

The Company

Colgate-Palmolive manufactures and markets consumer products worldwide. Its many brands include Colgate, Palmolive, Irish Spring, Speed Stick, Ajax, Tom's of Maine and Hill's Science Diet. The company was founded in 1903 and is headquartered in New York City. It is a member of the S&P 500 and has a market cap of $47.0 billion.

Competitors include Clorox (NYSE: CLX) and Procter & Gamble (NYSE: PG). Both of these peers topped earnings estimates in their most recent quarters. Clorox is expected to post modest EPS and revenue growth when it next reports on May 2, but analysts expect an earnings decline and sales essentially flat year-over-year from Procter & Gamble when it shares its results Thursday.

See also: Procter & Gamble Fails to Clean Up on Q2

During the three months that ended in March, Colgate-Palmolive raised prices in North America for the first time in more than two years. Its board increased its quarterly dividend by 7%, or four cents per share. And an executive from Google (NASDAQ: GOOG) joined Colgate's board.

Performance

Colgate's long-term earnings per share growth forecast is 8.9%. Its return on equity is 96.3% and the operating margin is higher than the industry average. Its 19.8 trailing P/E ratio is lower than the industry average. The dividend yield is 2.5%. But only five of 24 analysts who follow the stock recommend buying shares. The share price has outpaced their mean price target.

The stock hit a multiyear high of $99.00 last Friday, and the share price is now about 8% higher than at the beginning of the year, as well as up more than 26% from a year ago. The price has been above the 50-day and 200-day moving averages since late January. Over the past six months, the stock has outperformed Clorox, Johnson & Johnson, Procter & Gamble and Unilever (NYSE: UN).

ACTION ITEMS

Bullish: Investors interested in exchange traded funds invested in Colgate-Palmolive might want to consider the following trades:

  • iShares Morningstar Large Growth Index (NYSE: JKE) is more than 13% higher year to date.
  • PowerShares Dynamic Large Cap Growth (NYSE: PWB) is more than 13% higher year to date.
  • Vanguard Growth ETF (NYSE: VUG) is about 12% higher year to date.
  • iShares Russell 1000 Growth Index (NYSE: IWF) is almost 12% higher year to date.
Bearish:

Traders may prefer to consider these alternative positions in the personal products industry:

  • Blyth (NYSE: BTH) is up more than 46% year to date.
  • Avon Products (NYSE: AVP) is up more than 25% year to date.
  • Nu Skin Enterprises (NYSE: NUS) is up more than 22% year to date.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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