Motley Fool Inside Value recommendation Colgate-Palmolive (NYSE:CL) turned in the sort of quarter that will bring yawns from most investors but a smile to those who got in a while back, when the getting was cheap.
The firm's third-quarter results showed reasonable revenue growth, but earnings were teeter-tottered by so many gains and charges that it's tough to figure out exactly what happened, especially without a program. Given the amount of restructuring afoot at the big consumer-products concern, investors have little choice but to take everything at face value. Let's have a peek.
At the top line, Colgate reported 5% volume growth and 8% revenue growth, each of which ticks up another half percent if you exclude the results of recent divestments. A one-time gain resulting from Colgate's dropping the soap biz was overshadowed by other restructuring and repatriation charges.
At the bottom line, it added up to $0.63 per share, which looks like an 8% gain over the same period last year. Excluding charges, it comes to something more like $0.67 per stub, or a 15% uptick. The firm expects to return to double-digit earnings growth in 2006 through advertising to support the core brands, strong growth in Latin America, slighter growth in Asia and Africa, and continued restructuring savings.
There's really not much else to say. Like other big consumer-goods concerns such as Unilever (NYSE:UL) and Procter and Gamble (NYSE:PG), Clorox (NYSE:CLX), or even foodies Kraft (NYSE:KFT) and Kellogg (NYSE:K), Colgate's got enduring power because of its brands. Companies of this size aren't spectacular growth opportunities just waiting for exploitation, but they do provide robust downside protection. I see it every time I hit the store; I'm always amazed by the way people pick up the familiar when they shop (yes, I spy) even when there are cheaper alternatives available.
That's why I purchased Colgate-Palmolive during last year's freakout, about the same time our value guru Philip Durell made it an Inside Value pick. Since then, the company has returned a market-beating 13%, and though I've moved on to greener pastures, I think that investors who continue to hold will see solid returns even from here, while enjoying some of that peace of mind that comes only with a powerhouse brand like Colgate.
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Colgate-Palmolive is a Motley Fool Inside Value recommendation. Kraft and Unilever areMotley Fool Income Investorpicks.
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Seth Jayson threw some money Colgate's way with a recent toothpaste purchase. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.
