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Consumer products company Colgate-Palmolive (NYSE:CL) reported Q2 CY2024 results topping analysts' expectations, with revenue up 4.9% year on year to $5.06 billion. It made a non-GAAP profit of $0.91 per share, improving from its profit of $0.77 per share in the same quarter last year.
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Colgate-Palmolive (CL) Q2 CY2024 Highlights:
- Revenue: $5.06 billion vs analyst estimates of $5.00 billion (1.1% beat)
- EPS (non-GAAP): $0.91 vs analyst estimates of $0.87 (4.7% beat)
- The company raised its full year organic revenue growth guidance to 7% at the midpoint (6% previously)
- Gross Margin (GAAP): 60.6%, up from 57.8% in the same quarter last year
- Free Cash Flow of $873 million, up 57.3% from the previous quarter
- Organic Revenue rose 9% year on year (8% in the same quarter last year)
- Sales Volumes rose 4.7% year on year (-3% in the same quarter last year)
- Market Capitalization: $79.16 billion
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 ProductsHousehold 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 GrowthColgate-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 5.4% over the last three years was sluggish as consumers bought less of its products. We'll explore what this means in the "Volume Growth" section.
This quarter, Colgate-Palmolive reported decent year-on-year revenue growth of 4.9%, and its $5.06 billion in revenue topped Wall Street's estimates by 1.1%. Looking ahead, Wall Street expects sales to grow 2.5% over the next 12 months, a deceleration from this quarter.
Volume GrowthRevenue 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%. 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.
In Colgate-Palmolive's Q2 2024, sales volumes jumped 4.7% year on year. This result was a well-appreciated turnaround from the 3% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.
Key Takeaways from Colgate-Palmolive's Q2 Results We were impressed by how significantly Colgate-Palmolive blew past analysts' organic revenue growth expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. That the company raised full year organic revenue growth guidance is icing on the cake. Overall, we think this was a really good quarter that should please shareholders. The stock traded up 1.1% to $97.54 immediately following the results.
