Talking Foolishly out of both sides of my mouth, I recently offered investors two big reasons to love consumer-staples company Colgate-Palmolive
On the top line, revenue of $3.99 billion was flat versus the year-ago quarter, while volume increased a not-too-shabby 1.5%. Both numbers are a significant improvement from the prior quarter, when sales and volume were in the doldrums.
Of course, third-quarter results likely made for an easier year-over-year comparison, given that we're measuring today's more stable macro environment against the onset of the financial crisis. Nonetheless, it could be that consumers are inching out of their shells -- maybe not for Starbucks'
On an organic basis, which excludes currency effects and restructurings, third-quarter sales rose 7%, helped by price increases and a healthy 2% volume gain.
As for profit, here's the real treat: Net income and earnings per share hit a record $590 million and $1.12, respectively. Stripping out restructuring charges that depressed third-quarter 2008 results, net income climbed 11%. Shareholders can be cheered that the earnings increase tops the company's five- and ten-year average EPS growth.
Meanwhile, gross margin expanded 2.8% on the back of higher pricing, cost-savings initiatives, and lower raw material and packaging expense. Management plowed the additional cash into advertising, which no doubt helped fuel the quarter's volume growth. The benefit of higher ad spending can also be seen in Colgate-Palmolive's market share, where its global toothpaste position came in at 45.1%, up from the prior quarter. However, while the company's manual toothbrush market share inched up annually -- showing that consumers haven't lost their proclivity for textured tongue fresheners and angled bristles -- sequentially, it was down slightly.
Looking ahead, management said it was "comfortable with external profit expectations for both the fourth quarter and the year." Based on the average analyst estimate from Yahoo! Finance, that puts full-year EPS at $4.29 -- up just shy of 11% from 2008. Hey, it sure beats the single-digit earnings decline expected from Procter & Gamble
Despite Colgate-Palmolive's solid results, investors should keep in mind that shares trade at a P/E-premium to those of fellow consumer-staples companies such as Unilever
Clorox, Kimberly-Clark, Procter & Gamble, and Unilever are Motley Fool Income Investor recommendations. Starbucks is a Stock Advisor recommendation. Unilever is a Global Gains pick. The Fool owns shares of Procter & Gamble and Starbucks. Try any of our Foolish newsletters today, free for 30 days.