Colgate-Palmolive (CL) reported stronger-than-expected Q2 results, topping both earnings and revenue estimates, driven by robust performance across all segments. Furthermore, the company posted a record 9% organic growth and increased its FY2022 outlook for organic sales growth.
Despite the beat and higher organic sales growth outlook, shares of the American multinational consumer products company remained flat and closed at $78.74 on July 29.
CL’s Q2 Beat
GAAP earnings of $0.72 per share declined 13% year-over-year but was a cent ahead of analysts’ expectations of $0.71 per share. The company reported earnings of $0.83 per share for the prior-year period.
Net sales jumped 5.5% year-over-year to $4.48 billion, exceeding consensus estimates of $4.35 billion. The increase in sales reflects a surge in organic sales, which grew 9% during the quarter.
CL Raises Sales Outlook
Based on robust Q2 results, management raised the organic sales growth guidance for FY2022 from 5% to 7%.
Meanwhile, net sales are expected to grow at the higher end of 1% to 4% due to a mid-single-digit negative impact from foreign exchange.
Furthermore, the company continues to forecast adjusted earnings to register a mid-single-digit decline due to reduced gross profit margin and higher advertising investment.
CL CEO’s Comments
Colgate-Palmolive CEO, Noel Wallace, commented, “Our solid results this quarter, despite significant headwinds from raw materials, foreign exchange and the broader macro environment, demonstrate that our strategies are working.”
He further added, “We will continue to deliver impactful innovation that provides value to our customers and consumers as we work to offset these headwinds and deliver sustainable, profitable growth over the long term.”
Wall Street’s Take on CL
Following the Q2 results, Goldman Sachs analyst Jason English reiterated a Buy rating and a price target of $89 (13% upside potential) on CL.
Jason stated, “Management retained its FY22 net sales and EPS outlook, as an expectation for higher organic growth was balanced by higher FX headwind to sales, EBIT, and EPS growth (now -MSD vs. -LSD prior); we are encouraged by CL’s retained FY22 outlook despite higher FX headwinds and expect the stock to outperform peers today as a result.”
The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on five Buys and eight Holds. The average Colgate-Palmolive price target of $82.23 implies 4.43% upside potential to current levels.
High TipRanks Smart Score for CL
CL scores a Perfect 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Concluding Thoughts
Shares of Colgate-Palmolive have remained resilient, remaining flat over the past year versus the underperforming markets.
Despite higher pricing, the company continues to retain sturdy global market share at 39.6% year to date. The increased organic sales outlook bodes well for the stock in the coming months.
