Global consumer products powerhouse Colgate-Palmolive Company (NYSE:CL) is expected to report on Friday that its first-quarter earnings rose slightly from year-ago levels thanks in part to a much-improved pet food business, a global restructuring plan and a robust new product lineup.
“The company clearly has strong innovation in the pipeline, and the combination of efficiency gains and operating leverage should more than offset some of the headwinds we see in 2014, such as a deteriorating geographic margin mix and higher local costs in many [emerging markets],” Credit Suisse analysts Michael Steib, Marcela Giraldo and Molly Eggleton wrote earlier this year.
Colgate said in January that it planned to release a new toothbrush called Optic White, with a built-in whitening pen for North America, and during the quarter it launched its new Maximum Cavity Protection toothpaste in Europe and emerging markets. In the first quarter, the company also launched a new line of Palmolive body soaps in Latin America and a new “deep clean” toothpaste and toothbrush in China.
Colgate expects to save between $90 million and $100 million annually after taxes from a previously announced cost-cutting plan. Credit Suisse analysts said earlier this month that “they’ve made progress in all three areas of the program, expanding commercial hubs, extending shared business services, and streamlining global functions and optimizing global supply chain and facilities.”
Analysts polled by Thomson Reuters expect that Colgate’s first-quarter earnings rose 3 percent to $646 million, or 68 cents per share, from the $626 million, or 66 cents per share, a year ago. Analysts expect earnings per share excluding one-time items to come in at 63 cents per share compared with 49 cents a year ago, a 29 percent increase.
They predict Colgate will report revenue grew to $4.321 billion from $4.315 billion a year ago.
“Colgate, even with the [emerging market] and currency headwinds it is seeing, should continue to see its resilience in an uncertain market,” Deutsch Bank analysts wrote in mid-April.
Deutsch Bank analysts estimate Colgate’s organic sales growth at an average 6 percent in the first quarter. By region, that’s 3 percent organic sales growth in North America, 10 percent in Latin America, 1 percent in Europe and the Pacific, 9 percent in Asia, and 7 percent in Africa/Eurasia.
Toothpaste sales in the U.S. declined 0.8 percent and power toothbrush sales decreased by 2 percent, but manual toothbrush sales increased by 4 percent over the 12 weeks ending March 15.
Operating margin is expected to have increased slightly to 23.3 percent over the quarter.
In pet nutrition, Colgate’s Hill’s brand grew sales by 7 percent in the fourth quarter, the strongest growth in five years, mainly on the backs of double-digit growth in the then-launched Ideal Balance pet food. Analysts expect Hill’s gross margins to continue improving into at least the second half of this year.