Do Not Overlook Colgate-Palmolive's Strong Fourth-Quarter Report

Colgate-Palmolive (CL 1.07%), the American toothpaste and soap titan, recently released its fourth-quarter report to wrap up fiscal 2013. The results were mixed compared to expectations, but still caused the stock to rise in the day's trading. Let's take a thorough look at the report and decide if now is the time to buy or if we should wait for it to come back down a bit.

Serving America since 1806
Colgate-Palmolive is a leading global consumer-goods company with a focus on oral care, personal care, home care, and pet nutrition. Its brands include Colgate, Palmolive, Speed Stick, Softsoap, Irish Spring, Protex, Hill's, and numerous others. The company sells products in over 200 countries and territories, which gives it one of the largest footprints of any public company.

The results
Colgate's fourth-quarter results were released before the market opened on Jan. 30. The results were mixed compared to analyst expectations and contained the following statistics:

Earnings per share increased 7.1% and revenue increased 1.8%, driven by global unit volume growth of 6.5%. Organic sales rose 6.5% as well, led by the emerging markets where organic sales grew an impressive 10.5%. Gross profit rose 2.5% to $2.57 billion, as the gross margin expanded 50 basis points to 59.1%. This margin expansion, paired with reduced overhead costs, allowed the company to increase advertising spending and drive market share performance worldwide. Here are the updated global market share statistics giving by Colgate:

It is hard to believe that one company can control nearly 45% of the toothpaste market, but this is a true testament to the strength and consumers' love of the Colgate brand. With this said, mouthwash has been the company's fastest-growing category and saw its market share expand 130 basis points year-over-year. Overall, this was a great quarter for Colgate-Palmolive and I believe that the results will support a rally to a fresh 52-week high.

Outlook for the new year
In the report, Colgate did not give specific statistics as to what it expects fiscal 2014 will hold.CEO Ian Cook did say the following, though:

"As we look ahead to 2014, based on the Company's current growth momentum and our confidence in the strength of our global growth and efficiency program, we are planning for a year of gross margin expansion and strong earnings-per-share growth in line with the consensus of external analyst estimates, excluding charges related to the 2012 Restructuring Program."

With this being said, the current consensus analyst estimates call for fiscal 2014's earnings per share to be about $3.09 on revenue of $18.3 billion. This would represent growth of 8.8% and 5.1% respectively. I believe that these estimates are well within reach and could easily be surpassed due to the strong growth being shown in Colgate's new products and in the emerging markets. This growth will likely result in price appreciation of the stock and the company will return additional cash to shareholders via its healthy 2.2% dividend and share repurchases.

Competitors due out soon
One of Colgate's largest competitors, Church & Dwight (CHD 1.11%), is about to release its own set of fourth-quarter earnings. The company is home to brands such as Arm & Hammer, Trojan, First Response, Nair, Oxi Clean, and Kaboom, and is also the leading producer of baking soda in the United States. The most competitive brand to Colgate-Palmolive is Arm & Hammer, as it has a very popular line of toothpaste and deodorant. These fourth-quarter results are due out on Feb. 4 and the expectations look like this:

These expectations call for earnings per share to increase 15.8% and revenue to grow 1.7% from the same period a year ago. Other than the key metrics, it will be important for Church & Dwight to provide an outlook for 2014 that is within or above Wall Street's estimates; the current expectations call for earnings of $2.77-$2.81 per share on revenue of about $3.2 billion. After Colgate's strong report, I am bullish on Church & Dwight and I believe it would be a strong play going into the report.

The Foolish bottom line
Colgate-Palmolive is one of the greatest companies in American history and its 44.9% market share in the toothpaste category shows that it is here to stay. The company's stock is rallying following its fourth-quarter report and I believe it will continue its rally throughout the year. Investors should look to initiate a position on any weakness in the coming days and hold onto it for several years.