Colgate Gears Up for Q1 Earnings: Here's What You Should Know

Colgate-Palmolive Company CL is expected to register top-line decline when it reports its first-quarter 2025 results  on April 25, before the opening bell. The Zacks Consensus Estimate for first-quarter revenues is pegged at $4.87 billion, indicating a decline of 3.8% from the year-ago quarter’s reported figure.

The consensus estimate for CL’s earnings is pegged at 86 cents per share and is expected to remain flat year over year. The Zacks Consensus Estimate for earnings for the quarter has moved down by a penny in the past seven days. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Colgate-Palmolive Company Price, Consensus and EPS Surprise

Colgate-Palmolive Company price-consensus-eps-surprise-chart | Colgate-Palmolive Company Quote

In the last reported quarter, the company's earnings beat the consensus estimate by 2.3%. It has delivered an earnings surprise of 3.8%, on average, in the trailing four quarters.

What the Zacks Model Unveils for CL Stock

Our proven model does not conclusively predict an earnings beat for Colgate this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Colgate currently has an Earnings ESP of -0.79% and a Zacks Rank of 3.

Key Aspects to Note About CL

CL’s first-quarter 2025 performance is likely to have encountered continued headwinds stemming from a combination of inflationary pressures, foreign currency fluctuations and soft performance across key regions. Markets like Latin America, which previously experienced significant pressure from currency devaluation despite growth in pricing and volume, remain vulnerable. These foreign exchange headwinds are expected to have continued eroding reported sales in the quarter under discussion.

In North America, the company has been facing lower sales and pricing, pointing to ongoing challenges in maintaining pricing power, likely driven by increased promotional activity and competitive market dynamics. If these trends continue into the first quarter of 2025, Colgate could face additional pressure on profitability, especially if elevated input and packaging costs persist.

Our model predicts a sales decline of 1.7% for first-quarter 2025. This includes a 7.2% dip in Latin America, a 1.5% decline in North America, a 3% fall in the Asia Pacific, a 4% dip in Africa/Eurasia, offset by an increase of 2.8% in Europe and 3% in Pet Nutrition. We expect volume growth of 1.3% and pricing gains of 2.1% for the first quarter.

Persistent inflation in raw materials and packaging costs is squeezing margins, limiting the company’s ability to reinvest in growth initiatives or offset the impact through pricing. This might have also impacted promotional activity and pricing decisions, further pressuring revenues.

Despite these headwinds, CL’s first-quarter performance is expected to have benefited from solid business momentum, supported by pricing, funding growth and other productivity initiatives. The company’s idea of delivering balanced organic sales growth, driven by improvements in all categories and divisions, and volume and pricing gains, has been driving its performance. CL’s brand strength, coupled with its focus on innovation, premiumization and digital transformation, is expected to have driven its performance in the to-be-reported quarter.

Additionally, the company has been delivering a sequential rise in the gross margin for the past few quarters, driven by continued strong pricing, benefits from revenue growth management initiatives, strength in the funding-the-growth program and other productivity initiatives. Continued gains from these initiatives are expected to have led to a gross margin expansion in the to-be-reported quarter.

We expect the adjusted gross margin to expand 130 basis points (bps) to 61.3% in the first quarter, with a 0.5% year-over-year rise in adjusted gross profit on a dollar basis.

CL’s Price Performance & Valuation

The recent market movements show that CL shares have gained 7.8% in the past three months compared with the industry's 2% growth.

CL Stock's  Three Month Price Performance

From the valuation standpoint, CL trades at a forward 12-month P/E multiple of 25.16X, exceeding the industry average of 20.89X and the S&P 500’s average of 17.61X. Colgate’s valuation appears quite pricey.

Stocks With the Favorable Combination

Here are some companies that, according to our model, have the right combination of elements to beat on earnings this reporting cycle.

The Estée Lauder Companies Inc. EL currently has an Earnings ESP of +14.31% and a Zacks Rank of 3. The Zacks Consensus Estimate for third-quarter fiscal 2025 EPS is pegged at 30 cents, which implies a 69.1% decrease year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.

 The Zacks Consensus Estimate for Estée Lauder Companies’ quarterly revenues is pegged at $3.5 billion, which indicates a 10.9% decrease from the figure reported in the prior-year quarter. EL delivered a trailing four-quarter earnings surprise of 101.9%, on average.
 
Freshpet, Inc. FRPT currently has an Earnings ESP of +2.56% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2025 EPS is pegged at 13 cents, which implies a 38.1% decrease year over year.
 
The Zacks Consensus Estimate for Freshpet’s quarterly revenues is pegged at $262.3 million, which indicates growth of 17.2% from the figure reported in the prior-year quarter. FRPT delivered a trailing four-quarter earnings surprise of 78.8%, on average.

Church & Dwight Co. CHD has an Earnings ESP of +0.66% and a Zacks Rank of 3 at present. CHD is likely to register top-line growth when it releases first-quarter 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.51 billion, which implies growth of 0.5% from the figure reported in the year-ago quarter.

The consensus estimate for Church & Dwight’s quarterly earnings has remained unchanged in the past 30 days at 89 cents per share, implying a decline of 7.3% from the year-ago quarter’s number. CHD delivered an earnings surprise of 9.6%, on average, in the trailing four quarters.

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This article originally published on Zacks Investment Research (zacks.com).

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