Colgate-Palmolive and Procter & Gamble on the Move After Earnings. Which Is the Better Buy Now?

Colgate-Palmolive (CL 1.38%) is one of the most dominant companies within any industry, with control of over 40% of the global toothpaste market and growing shares in other oral-care and consumer-product categories. The company released its first-quarter earnings on April 25. Let's take a look at the results and its outlook on the rest of the year and then compare it to one of its largest competitors, Procter & Gamble (PG 1.52%), to determine if we should buy right now.

Source: Fool Flickr

Starting the fiscal year off right
Colgate released its first-quarter report for fiscal 2014 before the market opened on April 25 and the results satisfied analysts' expectations; here's a breakdown:

Source: Benzinga

Colgate's earnings per share increased 3% and revenue increased 0.2% year-over-year, driven by global unit volume growth of 5%. Organic sales rose across all of Colgate's segments as the company reported a rise of 6.5% overall, led by an impressive 11% growth in Latin America and 10% growth in Africa and Eurasia. 

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Colgate's gross profit increased 0.4% to $2.52 billion and the gross margin showed strength, expanding 10 basis points to 58.4%; this margin expansion resulted from higher pricing and the company's cost-saving initiatives, but it was largely offset by increased costs associated with raw materials and foreign exchange transactions.

Also, it is worth noting that net cash provided by operations came in at $820 million, which allowed Colgate to repurchase approximately $453 million worth of its common stock and pay $316 million in dividends; this shows that the company is still strongly dedicated to maximizing shareholder value.

Overall, it was a fantastic quarter for Colgate, but weakness in the overall market caused its shares to remain relatively flat in the trading session that followed. Shares have rallied higher in the days since. However, before we draw this conclusion, let's take a look at what the company thinks the rest of the year will hold...

Will the growth continue throughout 2014?
Following the strong results in the first quarter, Colgate-Palmolive's Chief Executive Officer said, "Looking forward, we anticipate another year of strong organic sales growth and gross margin expansion in 2014, and expect diluted earnings per share for the year to grow 4% to 5% on a dollar basis and at a double-digit rate on a currency neutral basis." 

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The projection of 4%-5% growth would result in earnings per share in the range of $2.95-$2.98 for the full year, which is in-line with the current consensus analyst estimate of $2.99. Analysts also expect revenue of $17.76 billion in 2014, a growth of about 2% from 2013, so it is safe to assume that Colgate would agree with this guidance as well. 

With the earnings results and guidance in hand, I think Colgate-Palmolive represents a great investment opportunity and believe its stock will outperform the overall market for the remainder of the year; I think this because even though the stock is trading at all-time highs, it is still attractive based on its forward earnings and its bountiful 2.1% dividend will provide additional returns along the way; for these reasons, Foolish investors should look to initiate long-term positions immediately.

Source: Procter & Gamble

A competitor's stock on the move as well
Procter & Gamble, one of Colgate's direct competitors and the company behind brands such as Crest, Oral-B, and Dawn, released its third-quarter report on April 23. It too has watched its stock rise as a result of its report; here's a quick review of the quarter:

Source: Benzinga

P&G's earnings per share increased 5.1% and revenue decreased 0.2%, as organic sales and global volume both grew 3%. P&G's gross profit fell 2.9% to $9.96 billion and the gross margin took a big hit, declining 140 basis points to 48.4%; these declines resulted from higher commodity costs and foreign exchange transaction costs, among other factors.

Source: Crest

Even with weak revenue and profits, the company still generated $4.1 billion in operating cash flow, which it used to repurchase approximately $1.5 billion of its common stock and pay out $1.7 billion in dividends. Procter & Gamble, like Colgate, has a great track record of increasing returns to shareholders and this is a trend that will surely continue.

In summary, it was a great quarter for P&G regardless of analysts' revenue expectations, and its stock has reacted by rising more than 2% in the days since then. P&G represents a solid investment opportunity in itself, so investors who are not sold on Colgate-Palmolive should take a deeper look into it and its juicy 3.1% dividend.

The Foolish bottom line 
Colgate-Palmolive is home to several of the world's most powerful brands and its strong first-quarter earnings report showed this. The stock rose after the release and the company's outlook on the remainder of the year supports a continued rally. Foolish investors should strongly consider initiating positions right now to let Colgate's long-term growth and healthy 2.1% dividend provide them sizable returns for years to come.