By Meagan Clark - Global consumer products powerhouse Colgate-Palmolive Company (NYSE:CL) is expected to report slightly higher first-quarter earnings Friday as a sustained turnaround in the company’s pet nutrition brand, an on-track global restructuring program and an innovation pipeline including tooth whiteners, soaps and diet pet food products, continue to aid the company’s bottom line.
Colgate-Palmolive sells oral, personal and home care items and pet nutrition goods and dominates the global toothpaste market with 45 percent market share.
The company is expected to report net income of $646 million or 68 cents per share from the first quarter, a 3 percent increase from the $626 million or 66 cents per share of the year-earlier period, according to analysts polled by Thomson Reuters. Analysts expect earnings per share, excluding one-time items, of 63 cents per share compared with 49 cents per share in the year-earlier period, a 29 percent increase.
Revenue is expected to rise slightly to $4.321 billion in the first quarter of 2014 from $4.315 billion in the first quarter of last year.
Colgate management revealed plans in January of an Optic White manual toothbrush with a built-in whitening pen for North America and launched the Maximum Cavity Protection toothpaste with sugar and acid neutralizer 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. In pet nutrition, the company is launching a prescription diet medicine for stress and urinary tract health in cats.
“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.
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 declined 0.8 percent and power toothbrush sales decreased by 2 percent, but manual toothbrush sales increased by 4 percent over 12 weeks ending Mar. 15.
Operating margin is expected to have increased slightly to 23.3 percent over the quarter.
“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.
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.
In line with the company’s “Funding the Growth” initiative to cut costs and increase savings globally, Colgate expects to save between $90 million and $100 million after taxes.
“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,” Credit Suisse analysts wrote in late January.