Colgate-Palmolive (CL)

Consumer products company Colgate-Palmolive (NYSE:CL) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 5.8% year on year to $5.23 billion. Its non-GAAP profit of $0.95 per share was 4.2% above analysts’ consensus estimates.

Company Overview

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 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.

Competitors that offer a wide range of household and personal care products include Proctor & Gamble (NYSE:PG), Unilever (LSE:ULVR), and Church & Dwight (NYSE:CHD).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $20.38 billion in revenue over the past 12 months, Colgate-Palmolive is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. To accelerate sales, Colgate-Palmolive likely needs to optimize its pricing or lean into new products and international expansion.

As you can see below, Colgate-Palmolive’s 4.3% annualized revenue growth over the last three years was tepid, but to its credit, consumers bought more of its products.

This quarter, Colgate-Palmolive reported year-on-year revenue growth of 5.8%, and its $5.23 billion of revenue exceeded Wall Street’s estimates by 1.7%.

Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and suggests its products will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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 volume growth was a healthy 1.2%. Even with this good performance, we can see that most of the company’s gains have come from price increases by looking at its 4.5% average organic revenue growth. The ability to sell more products while raising prices indicates that Colgate-Palmolive enjoys some degree of inelastic demand.

In Colgate-Palmolive’s Q4 2025, year on year sales volumes were flat. This result was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Colgate-Palmolive can reaccelerate demand for its products.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.

Colgate-Palmolive has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 60.3% gross margin over the last two years. That means Colgate-Palmolive only paid its suppliers $39.65 for every $100 in revenue.

In Q4, Colgate-Palmolive produced a 60.2% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Colgate-Palmolive has been an efficient company over the last two years. It was one of the more profitable businesses in the consumer staples sector, boasting an average operating margin of 18.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Colgate-Palmolive’s operating margin decreased by 5 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Colgate-Palmolive generated an operating margin profit margin of 1.8%, down 19.8 percentage points year on year. Since Colgate-Palmolive’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Colgate-Palmolive’s EPS grew at a decent 7.5% compounded annual growth rate over the last three years, higher than its 4.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q4, Colgate-Palmolive reported adjusted EPS of $0.95, up from $0.91 in the same quarter last year. This print beat analysts’ estimates by 4.2%. Over the next 12 months, Wall Street expects Colgate-Palmolive’s full-year EPS of $3.69 to grow 3.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Colgate-Palmolive has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 17.7% over the last two years.

Colgate-Palmolive’s free cash flow clocked in at $1.28 billion in Q4, equivalent to a 24.4% margin. This result was good as its margin was 2.5 percentage points higher than in the same quarter last year. Its cash profitability was also above its two-year level, and we hope the company can build on this trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Colgate-Palmolive’s five-year average ROIC was 37.8%, placing it among the best consumer staples companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Colgate-Palmolive reported $1.29 billion of cash and $7.99 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.96 billion of EBITDA over the last 12 months, we view Colgate-Palmolive’s 1.7× net-debt-to-EBITDA ratio as safe. We also see its $101 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Colgate-Palmolive beat analysts’ revenue expectations this quarter on better-than-expected organic revenue growth. We were also happy its EPS outperformed Wall Street’s estimates. Overall, this quarter was solid. The stock traded up 1.2% to $86.26 immediately after reporting.

Updated: January 30, 2026 at 7:14 AM EST

When considering an investment in Colgate-Palmolive, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Colgate-Palmolive is a fine business. Although its revenue growth was a little slower over the last three years and analysts expect growth to slow over the next 12 months, its admirable gross margins are a wonderful starting point for the overall profitability of the business. And while its declining operating margin shows the business has become less efficient, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits.

Colgate-Palmolive’s P/E ratio based on the next 12 months is 22.3x. When scanning the consumer staples space, Colgate-Palmolive trades at a fair valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $88.89 on the company (compared to the current share price of $86.26), implying they see 3.1% upside in buying Colgate-Palmolive in the short term.