Colgate-Palmolive stock (NYSE: CL) recently reported its Q4 results, with revenues missing and earnings slightly ahead of the street estimates. The company reported revenue of $4.94 billion and adjusted earnings of $0.91 per share, compared to the consensus estimates of $4.99 billion and $0.89, respectively. The company benefited from an uptick in Europe and Asia Pacific sales. However, its outlook for 2025 was below the expectations, resulting in a 5% fall in CL stock price post the results announcement.
CL stock, with 12% returns since the beginning of 2024, has underperformed the S&P 500 index, up 27%. The strengthening of the U.S. Dollar has weighed on the company’s performance lately. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did CL Fare In Q4?
Colgate-Palmolive’s revenues are reported under two segments – Oral, Personal, & Home Care, and Hill’s Pet Nutrition. These segments accounted for 78% and 22% of the total sales in 2024, respectively. The company’s top-line of $4.94 billion in Q4 reflected a 0.1% decline on a reported basis and a 4.3% growth on an organic basis. It saw a 2.5% rise in volumes and 1.8% pricing gains, more than offset by 4.4% forex headwinds.
Colgate-Palmolive saw its gross margin expand by 70 bps y-o-y to 60.3% in Q4. This helped the company post a bottom line of $0.91 per share on an adjusted basis, reflecting a 5% y-o-y growth. Looking forward, the company expects its organic sales to rise between 3% and 5% and a low to mid-single-digits growth in adjusted earnings in 2025.
Much of the company’s recent financial performance as well as the underwhelming outlook, can be attributed to the currency headwinds. Latin American currencies in particular have seen a meaningful impact on the company’s sales. FX accounted for a -16.4% contribution to Latin America’s sales, which otherwise saw a good 9.2% organic sales growth.
What Does This Mean For CL Stock?
Amid a miss on the top-line in Q4 and downbeat guidance for 2025, CL stock trended lower post the results announcement. Even if we look at a slightly longer period, the changes in CL stock over the last four-year period have been far from consistent, although annual returns were considerably less volatile than the S&P 500. Returns for the stock were 2% in 2021, -5% in 2022, 4% in 2023, and 17% in 2024.
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As markets grapple with uncertainty surrounding interest rate policies and newly imposed tariffs on Canada, Mexico, and China, is CL likely to mirror its underperformance versus the S&P 500 from 2021, 2023, and 2024 this year, or are we positioned for a significant upswing? While we will soon update our model for CL to reflect the latest results, we think after its recent fall, CL stock offers some room for growth. At its current levels of $87, CL stock trades at a little under 24x trailing earnings of $3.60 per share, lower than the stock’s average P/E ratio of 26x over the last five years. Despite ongoing foreign exchange pressures, the company’s market dominance remains intact. Given the positive trends in volume and sustained pricing power, a lower valuation multiple seems unwarranted.
While CL stock looks like it has some room for growth, it is helpful to see how Colgate-Palmolive’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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