Updated Aug 14 at 10:51am ET.
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Retail sales across the country fell by 0.6 percent last month, a sharper drop than the small growth seen in June. This suggests that shoppers are becoming more cautious with their spending as prices remain high.
For a company like Colgate, this kind of data is a mixed bag. While a general slowdown in spending can hurt total sales, the company sells daily necessities like toothpaste and soap that people tend to keep buying even when they cut back on luxury items. The bigger risk is if shoppers begin switching from name brands to cheaper store-brand alternatives to save money.
Source: WSJ
UBS increased its price target from $106 to $109 after the company showed it could still expand its profit margins despite a difficult economy. This is one of the more optimistic views among analysts, as the average target across all firms sits lower at $98. While the stock fell slightly after the recent earnings report, this target suggests the firm sees more room for the price to rise. It signals confidence that the company can keep its lead in toothpaste and manual toothbrushes while managing higher costs.
Source: UBS
The company reported earnings of $0.99 per share, which was better than the $0.95 analysts expected. Total sales rose about 5 percent to $5.36 billion, though organic sales, which strip out things like currency swings and acquisitions, grew a more modest 2.4 percent. The stock fell about 2.5 percent after the news as investors focused on weak demand in North America.
The most important detail for long-term owners is that gross profit margin, the percentage of sales left after paying for the goods themselves, rose to 61.5 percent. This shows the company is successfully raising prices and cutting costs to offset inflation. Even with a choppy economy, it maintained its global dominance with a 41 percent share of the toothpaste market.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts recently raised their price targets for Colgate-Palmolive following the company's strong second-quarter earnings report. Most analysts are split, with 19 of 45 rating it a buy, and the average target of $98 suggests 7% upside from today.
Management has a perfect record of clearing the bar set by analysts over the last two years. They consistently find ways to grow profits slightly faster than expected.
| Expectation | |
|---|---|
| EPS | $0.92 |
| Revenue | $5.34B |
Seeking Alpha · Opinion · Aug 5
Seeking Alpha · Opinion · Jul 31
Reuters · Jul 31
WSJ · Jul 31
Business Wire · Press release · Jul 17
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