Colgate-Palmolive's (NYSE:CL) Q1 Sales Beat Estimates

Anthony Lee /
2024/04/26 7:04 am EDT

Consumer products company Colgate-Palmolive (NYSE:CL) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 6.2% year on year to $5.07 billion. It made a non-GAAP profit of $0.86 per share, improving from its profit of $0.73 per share in the same quarter last year.

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Colgate-Palmolive (CL) Q1 CY2024 Highlights:

  • Revenue: $5.07 billion vs analyst estimates of $4.96 billion (2.1% beat)
  • EPS (non-GAAP): $0.86 vs analyst estimates of $0.81 (5.8% beat)
  • Full year 2024 guidance: organic sales growth guidance to 5% to 7% (versus 3% to 5% previously) (above expectations of 4.8%)
  • Gross Margin (GAAP): 60%, up from 56.9% in the same quarter last year
  • Free Cash Flow of $555 million, down 40.9% from the previous quarter
  • Organic Revenue was up 9.8% year on year (above expectations of up 5.1%)
  • Sales Volumes were up 1.3% year on year
  • Market Capitalization: $73.4 billion

Colgate-Palmolive Company (NYSE:CL) today reported results for first quarter 2024. Noel Wallace, Chairman, President and Chief Executive Officer, commented on the Base Business first quarter results, “We are very pleased to have started 2024 with another quarter of strong top and bottom line performance as we continued to execute our strategy successfully. Net sales increased 6.2% and organic sales grew 9.8%, with organic sales growth in every division and across all categories. We are particularly pleased to have delivered double-digit growth in operating profit, net income and earnings per share for the third consecutive quarter while still investing for the long-term health of our business.

Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE:CL) is a consumer products company that focuses on personal, household, and pet products.

Household Products

Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.

Sales Growth

Colgate-Palmolive is one of the largest consumer staples companies and benefits from a strong brand, giving it customer trust and leverage in many purchasing and distribution negotiations.

As you can see below, the company's annualized revenue growth rate of 5.7% over the last three years was mediocre as consumers bought less of its products. We'll explore what this means in the "Volume Growth" section.

Colgate-Palmolive Total Revenue

This quarter, Colgate-Palmolive reported solid year-on-year revenue growth of 6.2%, and its $5.07 billion in revenue outperformed Wall Street's estimates by 2.1%. Looking ahead, Wall Street expects sales to grow 3.1% over the next 12 months, a deceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Colgate-Palmolive generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Colgate-Palmolive's average quarterly sales volumes have shrunk by 1.5%. This decrease isn't ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Colgate-Palmolive was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 8.5% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren't sustainable over the long term unless the business is really really special.

Colgate-Palmolive Year-On-Year Volume Growth

In Colgate-Palmolive's Q1 2024, sales volumes jumped 1.3% year on year. This result was a well-appreciated turnaround from the 2% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.

Key Takeaways from Colgate-Palmolive's Q1 Results

We were impressed by how significantly Colgate-Palmolive blew past analysts' organic revenue growth expectations this quarter. We were also glad its revenue and EPS outperformed Wall Street's estimates. Looking ahead, the company raised its full year organic revenue growth guidance, which at the midpoint was above expectations. Overall, we think this was a really good quarter that should please shareholders. The stock is up 2.9% after reporting and currently trades at $91.89 per share.

Colgate-Palmolive may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.