Sign in
CP

COLGATE PALMOLIVE CO (CL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered EPS and margin resilience despite FX and category softness: Base Business EPS $0.91 vs GAAP $0.85; gross margin expanded 80 bps to 60.8%; operating margin rose 120 bps to 21.9% .
  • Revenue of $4.911B declined 3.1% YoY on a 4.4% FX headwind, while organic sales grew 1.4%; advertising rose 30 bps to 13.6% of sales to support brand health .
  • Guidance was revised: FY25 organic growth cut to 2–4% (from 3–5%), margins now “roughly flat,” and net sales “up low single digits” with a low-single-digit FX headwind; update reflects ~$200M incremental tariff impact .
  • Execution strengths: Hill’s operating margin +510 bps YoY and strong broad-based pet performance; Europe showed volume and pricing strength; North America faced softer volumes amid retailer destocking and consumer caution .
  • Stock reaction catalysts: EPS beat vs Street, cautious guide reset due to tariffs, and clear mitigation playbook (productivity, sourcing, RGM) to defend margins while sustaining innovation investment .

What Went Well and What Went Wrong

What Went Well

  • Hill’s Pet Nutrition delivered robust profitability and broad-based growth across wet, dry, treats, cat, dog, and prescription/Science Diet; division OP margin expanded ~510 bps YoY and OP rose 30% . “Ex private label, that business was up 5% in organic growth…we grew organic sales in every combination that we measure” .
  • Europe showed healthy volume and pricing; OP up 12% and margin +220 bps YoY to 24.9%, supported by premium innovation and mix (elmex/meridol) .
  • P&L flexibility funded higher advertising (13.6% of sales; +30 bps) while delivering OP, net income and EPS growth; management emphasized continued investment in AI/data analytics to drive ROI .

What Went Wrong

  • FX was a significant headwind (-4.4% to net sales), and consumer softness drove weaker volumes in North America; organic -3.0% with volume -2.3% .
  • Asia Pacific and Africa/Eurasia saw volume pressure, with Asia Pacific organic -3.1% (volume -3.4%) and Africa/Eurasia organic +1.8% but volume -2.3% .
  • Guidance reset on tariffs (~$200M incremental impact); gross margin and ad spend now “roughly flat” vs prior expectation of margin expansion; organic growth lowered to 2–4% .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$5,065 $5,033 $4,944 $4,911
Diluted EPS (GAAP, $)$0.83 $0.90 $0.90 $0.85
Base Business EPS (Non-GAAP, $)$0.86 $0.91 $0.91 $0.91
Gross Profit Margin %60.0% 61.1% 60.3% 60.8%
Operating Profit Margin %20.7% 21.2% 21.5% 21.9%
Advertising ($USD Millions)$672 $694 $648 $668

Actual vs Consensus (S&P Global)

MetricQ3 2024Q4 2024Q1 2025
Primary EPS Consensus Mean vs Actual ($)0.885 vs 0.91*0.889 vs 0.91*0.858 vs 0.91*
Revenue Consensus Mean vs Actual ($USD)$5.006B vs $5.033B*$4.989B vs $4.945B*$4.863B vs $4.911B*
EBITDA Consensus Mean vs Actual ($USD)$1.238B vs $1.207B*$1.251B vs $1.183B*$1.200B vs $1.217B*

Values retrieved from S&P Global.

Segment Breakdown (Q1 2025 vs Q1 2024)

DivisionNet Sales Q1 2024 ($mm)Net Sales Q1 2025 ($mm)Operating Profit Q1 2024 ($mm)Operating Profit Q1 2025 ($mm)OP Margin Q1 2024OP Margin Q1 2025
North America (Oral, Personal & Home Care)$1,035 $998 $214 $196 20.6% 19.6%
Latin America$1,253 $1,143 $405 $348 32.3% 30.4%
Europe$673 $690 $153 $172 22.7% 24.9%
Asia Pacific$727 $690 $207 $198 28.5% 28.7%
Africa/Eurasia$276 $271 $66 $57 24.0% 21.0%
Hill’s Pet Nutrition$1,102 $1,118 $199 $258 18.0% 23.1%
Total Company$5,065 $4,911 $1,047 $1,076 20.7% 21.9%

KPIs

KPIQ1 2025Reference
Global Market Share – Toothpaste (YTD)40.9%
Global Market Share – Manual Toothbrushes (YTD)31.9%
Net Cash Provided by Operations ($mm)$600
Free Cash Flow Before Dividends ($mm)$476
Total Debt ($mm)$8,269
Debt less cash, cash equivalents & marketable securities ($mm)$6,958
Working Capital % of Sales(3.3)%
Advertising % of Sales13.6% (+30 bps YoY)

Guidance Changes

MetricPeriodPrevious Guidance (Jan 31, 2025)Current Guidance (Apr 25, 2025)Change
Net Sales GrowthFY 2025Roughly flat, mid-single-digit FX headwind Up low single digits, low-single-digit FX headwind Raised net sales trajectory; FX headwind moderated
Organic Sales GrowthFY 20253%–5% (long-term range) 2%–4% Lowered
Gross Profit Margin (% of sales) – GAAPFY 2025Expansion expected Roughly flat Lowered
Advertising Investment (% of sales) – GAAPFY 2025Flat to up slightly Roughly flat Lowered
EPS Growth – GAAPFY 2025Mid-single-digit Up low single digits Lowered
EPS Growth – Base BusinessFY 2025Low-to-mid-single-digit Up low single digits Lowered
Tariff ImpactFY 2025Not quantified; risk noted ~$200M incremental impact included in guidance New quantified headwind
Dividend per ShareQ2 2025$0.50$0.52 (annualized $2.08) Raised
Share Repurchase Authorizationfrom Mar 20, 2025Prior $5B (2012/2022 programs)New $5B authorization Renewed capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Tariffs/Macro VolatilityCautionary statements re potential tariffs and macro risks ~$200M incremental tariff impact; mitigation via productivity, sourcing, RGM; margin target “roughly flat” Headwinds increased; mitigation in focus
Supply Chain FlexibilityBuilding P&L flexibility; strong margin performance >$2B invested in U.S. supply chain over 5 years; lowered China dependence; flexible sourcing Structural resilience strengthened
AI/Data AnalyticsScaling capabilities in digital/data analytics to drive growth Continued investment in AI and analytics to optimize promotions/pricing ROI Capability scaling continues
Hill’s PerformanceOP +19% in Q4; strong margins Broad-based growth across formats/species; OP margin +~450–510 bps; ex-private label organic +5% Structural outperformance; margin tailwinds
Europe Mix/PricingQ3/Q4: Europe growth with price/mix Europe OP +12%; margin +220 bps; premiumization via elmex/meridol Momentum sustained
North America Category SoftnessQ4: NA organic roughly flat Category/consumer softness, retailer destocking; shipments pacing consumption; strategy sharpened Soft near-term, improvement expected H2
China/Asia TrendsQ3: Asia growth; caution on China earlier China remained soft (Holly & Hazel JV); Colgate brand mid-single-digit organic growth Mixed; China weakness persists
Advertising ROI DisciplineIncreased ad investment in Q3/Q4 Ad at 13.6% of sales; flex spending and ROI optimization; local currency ad likely up Spend disciplined/flexible

Management Commentary

  • “We expect the impact of tariffs…to have an incremental impact of roughly $200 million in 2025 versus our initial guidance…we have changed many of our sourcing strategies and also invested approximately $2 billion in our supply chain in the United States over the past 5 years” — Noel Wallace .
  • “We also remain committed to investing in and scaling capabilities like AI, data analytics and innovation…we delivered strong profit growth despite the volatility” — Noel Wallace .
  • “Ex private label, [Hill’s] was up 5% in organic growth…we grew organic sales in every combination that we measure…strong margin performance…roughly 450 basis points” — Noel Wallace .
  • “We ended 2025 with the advertising spending at an all-time high…our focus on driving ROI leaves us well positioned” — Noel Wallace .
  • “We have concluded [Mexico toothpaste] is compliant with USMCA, so it’s not subject to that” — Stan Sutula on tariff mitigation .

Q&A Highlights

  • Consumer/category softness and destocking: NA categories soft in Feb; signs of stabilization in April; shipments pacing consumption; innovation to drive H2 recovery .
  • Pricing strategy: Incremental pricing in LATAM (Mexico/Brazil) in H2; U.S. pricing improved sequentially; use RGM and AI to optimize pricing/promotions; tariffs may necessitate targeted pricing .
  • Emerging markets: LATAM value/volume share strength; Africa/Middle East strong; China soft in JV; India urban softness .
  • Hill’s outlook: No trade-down; broad-based growth; exiting private label creates slight quarterly volume drag in H1/H2 but margin tailwind; completion targeted by Q3 .
  • Tariff mitigation: Impact roughly linear across Q2–Q4; mitigation ramps through the year via productivity, sourcing, formula simplification; scenario analysis ongoing .

Estimates Context

  • Q1 2025: EPS $0.91 vs $0.858 consensus (beat); revenue $4.911B vs $4.863B consensus (beat); EBITDA $1.217B vs $1.200B consensus (beat). Estimates likely to adjust down on FY25 margin trajectory and organic sales range (2–4%) given tariff headwinds.*
  • Q4 2024: EPS $0.91 vs $0.889 consensus (beat); revenue $4.945B vs $4.989B consensus (miss); EBITDA $1.183B vs $1.251B consensus (miss).*
  • Q3 2024: EPS $0.91 vs $0.885 consensus (beat); revenue $5.033B vs $5.006B consensus (beat); EBITDA $1.207B vs $1.238B consensus (miss).*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 2025 print shows resilient EPS/margins despite FX and category softness; sustained ad and innovation investment supports brand health .
  • Hill’s is a structural growth/margin lever; private label exit is an optical volume drag but a clear margin tailwind; expect OP strength to persist .
  • Guidance reset reflects ~$200M tariff impact; expect mitigation to build through 2025 via productivity/sourcing/RGM; watch H2 gross margin cadence .
  • Europe’s premiumization/mix strategy continues to work; monitor whether NA volumes normalize as category softness abates and innovation lands in H2 .
  • Near-term trading: EPS beat vs consensus and transparent tariff quantification may limit downside; however, lower organic/margin guide caps upside without clear H2 recovery signal.*
  • Medium-term thesis: Brand strength, AI-enabled RGM, and supply chain flexibility underpin earnings compounding; FX and China remain watch points .
  • Capital returns intact: Dividend raised to $0.52 and $5B buyback authorization support TSR amid macro/tariff volatility .