Colgate-Palmolive Company (NYSE:CL) has reported robust results for the fourth quarter of 2023, surpassing the Zacks Consensus Estimate for both earnings and sales while demonstrating year-over-year improvement. The positive outcome is attributed to strong top-line growth, enhanced organic volume performance, and expanded gross and operating profit margins.
On a Base Business basis (non-GAAP), earnings stood at 87 cents per share, reflecting a 13% increase from the previous year. This exceeded the Zacks Consensus Estimate of 85 cents.
Net sales amounted to $4,950 million, marking a 7% increase from the same quarter last year and surpassing the Zacks Consensus Estimate of $4,898 million. The company’s organic sales also showed a 7% improvement. Total volumes remained flat on both an organic and reported basis, while pricing experienced a 7% uptick. Currency fluctuations had a neutral impact on sales in the quarter.
Gross profit reached $2,950 million, indicating a substantial 14.6% year-over-year increase. The gross profit margin expanded by 400 basis points to 59.6% on both GAAP and adjusted bases, surpassing expectations with an expansion of 170 basis points to 57.3%.
Selling, general, and administrative (SG&A) expenses grew by 10.4% year over year to $1,803 million. As a percentage of net sales, SG&A expenses expanded by 110 basis points to 36.4%, exceeding predictions of a 50 basis points increase to 35.8%.
Colgate’s global market share in the manual toothbrush category reached 31.5% year to date, while the company maintained its leadership position in the global toothpaste market with a market share of 41.1% year to date. Over the past three months, shares of the company have surged by 13.1%, outperforming the industry’s growth of 4.6%.
Segmental Discussion
North America’s net sales (20% of total sales) increased by 3.5% year over year, driven by a 3% increase in pricing and a 0.5% rise in volume. Colgate’s organic sales in the region improved by 3.5%, propelled by growth in oral care and personal care.
Latin America’s net sales (24% of total sales) surged by 18% year over year, benefiting from pricing gains of 8.5%, a volume increase of 8%, and a 1.5% favorable currency impact. On an organic basis, sales in the region rose by 16.5%.
Europe’s net sales (14% of total sales) increased by 10% year over year, primarily driven by a 7.5% increase in pricing and a 6.5% favorable currency impact. Organic sales in the region were up 3.5%.
The Asia Pacific segment’s net sales (14% of total sales) grew by 0.5% year over year, with a 4.5% decline in volumes and a 0.5% adverse currency impact offset by a 5.5% rise in pricing. Organic sales improved by 1%.
Africa/Eurasia’s net sales (5% of total sales) declined by 4% year over year due to a 21% unfavorable currency impact. However, volume and pricing increases led to a 17% growth in organic sales.
Hill’s Pet Nutrition’s net sales (23% of total sales) improved by 5% from the previous year, driven by an 8.5% increase in pricing and a 0.5% positive currency impact, partially offset by a 4% decline in volume.
Other Financial Details
Colgate ended 2023 with cash and cash equivalents of $966 million and total debt of $8,549 million. Net cash provided by operating activities was $3,745 million for the 12 months ended Dec 31, 2023, and the free cash flow before dividends was $3,040 million.
Outlook
Management has provided its sales and profit forecast for 2024. Colgate anticipates net sales growth of 1-4%, including a low-single-digit negative impact from currency. The company expects organic sales growth to be within its long-term targeted range of 3-5%. Gross profit margin expansion and increased advertising investment are anticipated on both GAAP and adjusted bases. Adjusted earnings per share are expected to grow in the mid to high-single-digits, while on a GAAP basis, earnings per share are projected to increase in the double digits.
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