Colgate, P&G, or Church & Dwight: Which Toothpaste Titan Had the Best Quarter?

One of the primary personal care products purchased today is toothpaste, and as the world continues to become more developed this product will only grow in demand. Three of the most popular global brands of toothpaste are Colgate, Crest, and Arm & Hammer, and the parent companies behind these brands, Colgate-Palmolive (NYSE: CL  ) , Procter & Gamble (NYSE: PG  ) , and Church & Dwight (NYSE: CHD  )  have just reported quarterly results. Let's find out which company had the best quarter and if we should be investing today.

The toothpaste titans
Colgate-Palmolive is a leading global consumer-goods company which focuses 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.

Procter & Gamble, or P&G, is one of the world's leading consumer-goods companies. It is home to the largest lineups of industry-leading brands; in fact, it is home to 25 billion-dollar brands, including Crest, Tide, Gain, Downy, Gillette, Charmin, Pampers, and Duracell. The company currently operates in 70 countries and its products are available in over 180 countries, serving approximately 4.8 billion people.

Church & Dwight manufactures and markets personal care, household, and specialty products worldwide. Its most popular brands include Arm & Hammer, Trojan, First Response, Nair, Oxi Clean, and Orajel. Church & Dwight is also the leading producer of baking soda in the United States, which is sold in retail packaging and also paired with other specialty chemicals for industrial, institutional, medical, and food applications.

 

The quarterly results
Colgate

Fourth-quarter results for fiscal 2013 were released on Jan. 30 and the statistics were mixed compared to analyst expectations. Here's an overview of the results with a year-over-year comparison:

Metric Reported Expected
Earnings Per Share $0.75 $0.74
Revenue $4.36 billion $4.40 billion
  • Earnings per share increased 7.1%
  • Revenue increased 1.8%
  • Global unit volume growth of 6.5%
  • Organic sales rose 6.5%
  • Gross profit rose 2.5% to $2.57 billion
  • Gross margin expanded 50 basis points to 59.1%
  • Other most notable statistic -- updated global market share information:
Category Toothpaste Manual Toothbrushes Mouthwash
Market Share

44.9%

32.8% 17%

Procter & Gamble

The second-quarter report for fiscal 2014 was released on Jan. 24 and the results were mixed in comparison to expectations. Here's a breakdown of the quarter and a year-over-year comparison:

Metric Reported Expected
Earnings Per Share $1.21 $1.20
Revenue $22.28 billion $22.35 billion
  • Core earnings per share decreased by 1%
  • Revenue remained unchanged
  • Global unit volume increased 3%
  • Organic sales grew by 3% 
  • Gross profit fell 1% to $11.15 billion 
  • Gross margin declining 90 basis points to 50%
  • Other most notable statistic -- repurchased $1.5 billion in shares and paid $1.7 billion in dividends during the quarter

Church & Dwight

Fourth-quarter results were released after the market closed on Feb. 3 and the statistics did not meet expectations. Here's a review of the release with a year-over-year comparison:

Metric Reported Expected
Earnings Per Share $0.65 $0.66
Revenue $822.6 million $823.5 million
  • Earnings per share increased 14%
  • Revenue increased 1.6%
  • Global unit volume grew 5.2%
  • Organic sales increased 2.3%
  • Gross profit rose 3.7% to $371.7 million
  • Gross margin expanded 90 basis points to 45.2%
  • Other most notable statistic -- raised its quarterly dividend by 11% to $0.31, or $1.24 annually, giving it a yield of about 1.9% at current levels

Outlook on the year
Guidance given by the companies is just as important as the earnings and revenue numbers themselves. Here's what each company had to say in terms of what it expects going forward:

Colgate

In the report, Colgate did not give specific statistics as to what it expects fiscal 2014 will hold, but CEO Ian Cook did state the following:

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. Overall, these expectations can support a run to fresh 52-week highs.

Procter & Gamble

As a buffer to the better-than-expected earnings results, P&G affirmed its full-year outlook for fiscal 2014 which called for the following results:

Metric Expected Growth
Reported EPS 7%-9%
Core EPS 5%-7%
Net Sales 1%-2%
Organic Sales 3%-4%

This is a great set of expectations for a company that is in the midst of a restructuring. I think this was the best aspect of the earnings report and it should make investors bullish on P&G's potential for the rest of the year. In fact, CEO A.G. Lafley said, "We expect strong earnings growth in the second half of the fiscal year driven by solid top-line growth... and productivity savings that build throughout the year." I believe P&G will deliver on Mr. Lafley's expectations and allow the stock to rise from its current levels. 

Church & Dwight

Church & Dwight gave guidance for fiscal 2014 that was above analysts' expectations. Here's a breakdown:

Metric Outlook
Earnings Per Share $2.96-$3.07
EPS Growth 6%-10%
Organic Sales Growth 3%-4%

The company's outlook on earnings came in above analysts' expectations which called for earnings in the range of $2.77-$2.81 per share. Also, as the company's organic sales are expected to grow 3%-4%, the gross margin is expected to remain flat. If Church & Dwight can deliver on these earnings expectations while repurchasing shares and paying out the healthy 1.9% dividend, there is no doubt in my mind that the stock will head higher over the course of the year.

And the winner is...
When comparing the earnings numbers and outlooks on the year, I believe Colgate-Palmolive had the best quarter. Colgate owns a nearly 45% share in the global toothpaste market and strong positions in manual toothbrushes and mouthwash, and I do not think the rival brands will be able to catch up anytime soon. The company's stock has great upside potential as it currently sits over 9% below its 52-week high and it will provide additional returns via its healthy 2.25% dividend. I believe investors should look to pick up positions in Colgate on any weakness in the coming days.

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