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Colgate-Palmolive Company - Not Just Surviving, But Thriving


A recent SA article questioned CL's ability to survive based on the last report.

The number failed to account for forex and quarterly charges that masked a strong quarter.

While CL faces headwinds, it is thriving, especially in comparison to some of its peers.

Within a few days of Colgate-Palmolive Co. (NYSE:CL) announcing its earnings, Daniel Jennings published a piece titled "Can Colgate-Palmolive Survive?" I initially wondered upon reading the article's summary and numbers if I should ditch my shares in CL - was the report that bad?

Then I read his arguments, which were based on the reduced revenues that CL had seen on a year-over-year (YoY) comparison and what he painted as a dreary spiral. He concluded that a private labels combined with a reduction in retailers, such as several chains selling out or closing, show that CL and other big brands in the future will be the losers as they have lost their ability to make money.

But, the article seemed to not really dig into the CL report, and made some very broad assumptions. It did not consider de-consolidation and limited charges that CL had incurred. Thus, when you did deeper into the numbers, one can find several signs that CL will not only survive, but continues to thrive…such as:

  • Net sales of $3,762 million in the first quarter (Q1), a 7.5% decrease YoY

*However, this was including divested businesses and de-consolidation of its Venezuelan operations; if you take those out, unit volume was up 3.5%, pricing increased 1.5%, and that little headwind (little is sarcastic here) that all companies with foreign sales face - forex - had a negative 8.0% impact.

* In fact, on a currency-neutral basis and excluding charges from the 2012 Restructuring Program and Venezuela in both periods, Diluted earnings per share increased double digits.

  • Organic sales grew 5% - well ahead of the Procter & Gamble (NYSE:PG) 1% recently reported, and was led by a 7.5% increase in emerging markets.
  • Gross profit margin in Q1 grew from 58.8% to 59.8 percent
  • without restructuring considerations Operating profit increased to $867 million in first quarter 2016 compared to $860 million in first quarter...