Colgate profit meets Wall Street expectations

Thu Apr 25, 2013 11:33am EDT

(Reuters) - Colgate-Palmolive Co's (CL.N) profit matched Wall Street expectations and sales were better than expected, easing concerns a day after rival Procter & Gamble Co (PG.N) appeared to be under pressure.

Shares of Colgate were up 2 percent to $120.34 on Thursday after falling nearly 3 percent Wednesday, when P&G reported lighter-than-anticipated sales and said profit would fall more than analysts estimated this quarter.

Robert Campagnino, managing director at Hedgeye Risk Management, said a bit of a "relief" rally was to be expected after Colgate's strong sales and in-line profit. Still, Colgate shares already trade at a high multiple and good news appeared to be factored into the stock price, he added.

Analysts expressed concerns about declines in sales, volume and operating profit at its Hill's pet food business. Colgate has said it wants to improve the operation with some higher-end products.

Colgate, best known for its namesake toothpaste, said it raised some prices and spent more to advertise new products while cutting costs.

Colgate goes head-to-head against P&G in toothpaste, toothbrushes and soaps. It also competes against Europe's Unilever (ULVR.L)(UNc.AS), which posted weaker-than-expected first-quarter growth on Thursday.

VENEZUELA IMPACT

February's devaluation of the Venezuelan bolivar led Colgate to take a hefty charge in the quarter and to plan for additional charges later in the year. For U.S. companies that do business in the country, the devaluation meant their earnings in bolivars were worth less when converted back to dollars.

In February, Venezuela devalued the bolivar by 32 percent, requiring Colgate to adjust its balance sheet to the new rate. The New York-based company had already warned the revaluation would cut earnings by as much as 7 cents per share per quarter. On Thursday, it said it expected the impact of the currency devaluation to be 5 cents to 7 cents per quarter.

The company affirmed its forecast of 2013 earnings-per-share growth of 5.5 percent to 6.5 percent on a dollar basis. That equates to earnings of roughly $5.65 to $5.71 per share, while analysts were looking for $5.70, according to Thomson Reuters I/B/E/S.

Excluding aftertax charges of $111 million from Venezuela and $55 million from restructuring, Colgate earned $626 million, or $1.32 per share, matching the average analyst target.

On a net basis, first-quarter profit fell to $460 million, or 97 cents per share, from $593 million, or $1.23 per share, a year earlier.

Sales rose 2.5 percent to $4.32 billion, topping the analysts' estimate of $4.29 billion. The volume of goods sold rose 4 percent, and pricing was up 1.5 percent.

Organic sales, which strip out the effects of foreign exchange fluctuations, acquisitions and divestitures, rose 6 percent.

Sales in Latin America, Colgate's biggest market, were up 1 percent on a net basis and 9 percent on an organic basis.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and Lisa Von Ahn)