What happened
Shares of Colgate-Palmolive (CL 0.28%) were going down the drain today after the household-products maker posted disappointing third-quarter earnings. Price increases weren't enough to overcome challenges from foreign markets and rising commodity costs as difficult industry conditions continued. As a result, the stock was down 5.8% at 11:35 a.m. EDT.
Image source: Colgate-Palmolive.
So what
The maker of Irish Spring and Murphy's Oil soap as well as its namesake brands said that overall revenue fell 3% to $3.85 billion, short of analyst estimates at $3.89 billion, though foreign exchange rates accounted for a 4% decline in sales. Volume sales were flat in the period, and organic sales, which strip out the impact of acquisitions, divestitures, and currency exchange, slipped 0.5%.
Adjusted gross margin in the quarter fell 120 basis points to 59.2% due to higher raw material and packaging costs. Adjusted operating margin was down 190 basis points due to the higher input costs and increased selling, general, and administrative expenses from higher overhead and advertising expenses. Adjusted earnings per share fell a penny to $0.72 from a year ago, helped by a lower effective tax rate and fewer shares outstanding.
CEO Ian Cook expressed disappointment in the results, saying, "The third quarter was a challenging one with category growth rates remaining soft in many markets and unfavorable movements in foreign exchange." He also cited headwinds due to market volatility in Brazil and trade inventory reductions in China.
Now what
Looking ahead, Cook said he sees some of the same challenges for the fourth quarter, noting uncertainty in global markets, and forecast a low-single-digit organic sales increase. For the full year, the company lowered adjusted earnings guidance slightly from mid-single-digit growth to 3%-4%.
Given the underwhelming forecast and weak results, it's not surprising to see the stock trading lower today.
