Company Spotlight - Colgate-Palmolive: |  - Co. Spotlights available via RSS feed
| Consumer Juggernaut
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| | CL | $78.29 | The Good: Restructuring showing real benefits.
The Bad: Hard to Find.
The Beautiful: Return on Equity is extraordinary. | P/E | 24 | | PSR | 3 | | ROE | 95% | | Debt/Eq. | 1.2 | | Div.Yield | 2.1% |
April 14, 2008 - Colgate-Palmolive Co. (CL-NYSE) takes a bite out of grime. The company is a top maker and marketer of toothpaste and a worldwide leader in oral care products (mouthwashes, toothpaste, toothbrushes). Its Tom's of Maine unit covers the natural toothpaste niche. Colgate-Palmolive's Hill's Pet Nutrition subsidiary makes Science Diet and Prescription Diet pet foods, as well. Colgate-Palmolive also makes and markets personal care items (deodorants, shampoos, soaps) and household cleaners (bleaches, laundry products, soaps). The company operates in some 70 countries and sells products in more than 200. Colgate-Palmolive is nearing the end of a multiyear restructuring plan.
Colgate is a big company. And it's still growing. Sales in 2007 were $13.789 billion, up 12.7% from 2006. Profits were $1.737 billion, up 16.15%. (Note that profits were up more than sales, showing efficiencies at work.) Those efficiencies are coming from a restructuring program started in December of 2004. Analysts estimate total costs of between $725 million and $775 million to restructure. The return on that investment should show annual savings of $325 million and $350 million or about 45 cents a share in earnings. In addition, there are tax benefits from the program's charges. Sales are growing in Latin America, the largest market for CL, representing 25% of revenues and 31% of operating profits. There are new products with premium prices planned for introduction to this market in 2008 along with a strong ad and promotional budget of 12% of revenues to support them. Colgate is using its strong cash flow for stock buy backs and recently raised its quarterly dividend to 40 cents a share, up from 36 cents. The previous repurchase plan began in 2006 and totaled 30 million shares. The board authorized another 30 million over the next 2 years. The stock has almost 510 million shares outstanding. Other numbers: Net profit margin is 13.3%. Current assets are about 1.1 times current liabilities. Book value is $4.10 a share with projections of $4.70 for this year and $5.15 for next. Sales are forecast by analysts to grow by 8% a year, on average over the next 5 years, while earnings increase by 12% annually, on average, in the same time. Return on Equity for the last 3 years was 108%, 113.5% and 80%. Those are very impressive numbers. Foreign sales were 70% of 2007 revenues. Colgate's stock has held up well over the last several years, not participating in any of the market meltdowns. Of course, it hasn't soared above the rest either. But it's a solid company with plenty of growth left as it penetrates new markets and offers new products. - Company Web site: www.colgate.com - Ted Allrich |
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