Colgate (CL) To Report Q1 Earnings: What's In The Cards?

Consumer goods behemoth, Colgate-Palmolive Company (NYSE:CL) is scheduled to report first-quarter 2017 earnings on Apr 28, 2017, before the opening bell. In the preceding two quarters, the company’s earnings came in line with the Zacks Consensus Estimate.

What to Expect?

The question lingering in investors’ minds now is whether Colgate will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 66 cents, reflecting a year-over-year increase of over 4%. We note that the Zacks Consensus Estimate witnessed upward revisions in the past 30 days. Analysts polled by Zacks expect revenues of $3,782 million, inching up 0.5% from the year-ago quarter.

We noted that the stock has underperformed both the Zacks categorized Soap & Cleaning Preparations industry and the S&P 500 index in the past six months. The company’s shares have increased 3%, while the Zacks categorized industry and the S&P 500 have witnessed gains of 9.1% and 8.1%, respectively.

Factors at Play

Colgate which enjoys a market-leading position in the oral care and personal care product categories continues to focus on product innovations, globally recognized brands and broad international presence in both developed and emerging markets. The company is focused on these plans to take advantage of growth opportunities, consequently enhancing profitability.

Moreover, the company continues to progress well with savings programs, as both, Global Growth and Efficiency Program or 2012 Restructuring Program, and Funding the Growth undertakings are delivering impressive results. These initiatives contributed to the expansion of adjusted gross margin by about 180 basis points (bps) and adjusted operating margin by about 190 bps in fourth-quarter 2016.

However, earlier the company announced that it anticipates the backdrop to remain challenging due to the uncertain global markets and lingering currency headwinds in 2017. Hence, it expects net sales for 2017 to improve in low-single digits range.

Meanwhile, Colgate’s top-line has missed the estimate in the trailing three quarters, which is a major cause of concern. Foreign exchange continues to be a major headwind for the company, with around 75% of its business generated outside the U.S. Evidently, foreign currency exchange rates hurt revenue growth by 1.5% in the fourth quarter and is expected to negatively in the first quarter also.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Colgate is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Colgate has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 66 cents. While the company’s Zacks Rank #2 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

McDonald's Corporation (NYSE:MCD) currently has an Earnings ESP of +3.03% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Church & Dwight Co., Inc. (NYSE:CHD) currently has an Earnings ESP of +3.45% and a Zacks Rank #3.

Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) currently has an Earnings ESP of +17.24% and a Zacks Rank #3.

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