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COLGATE PALMOLIVE CO (CL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest growth: net sales $5.11B (+1.0% YoY), organic sales +1.8%, GAAP diluted EPS $0.91 (+2% YoY) and Base Business EPS $0.92 (+1% YoY) .
  • Results beat Wall Street: revenue beat by ~$0.08B ($5.11B vs $5.03B*) and EPS beat by ~$0.025 ($0.91 vs $0.895*); EBITDA was roughly in line/slightly below ($1.217B* actual vs $1.223B* estimate). Bolded below in table *.
  • Guidance tightened: organic growth now guided to the low end of 2–4% (was 2–4% in Q1), with net sales still up low single digits and both gross margin and advertising roughly flat; FX headwind updated to flat to low-single-digit negative .
  • Strategic catalysts: announced a new three‑year productivity program with $200–$300M pre‑tax charges to fund innovation, AI/data analytics, and supply chain optimization; charges recorded in Corporate and expected largely by year‑end 2028 .
  • Management highlighted raw material inflation (palm/veg oils, tallow) and tariffs as margin headwinds; AI‑driven revenue growth management (RGM) and funding‑to‑growth initiatives are the levers to offset pressures .

What Went Well and What Went Wrong

What Went Well

  • Organic growth accelerated sequentially despite a tougher backdrop: +1.8% in Q2 vs +1.4% in Q1; Noel Wallace: “another quarter of net sales, organic sales and earnings per share growth… with organic sales growth improving sequentially versus the first quarter” .
  • Hill’s Pet Nutrition delivered mid‑single‑digit organic growth ex private label, with balanced price/volume and stronger therapeutic mix; advertising launch and broad‑based growth across wet/cat/small breeds aided margins .
  • AI and data analytics increasingly embedded in RGM and innovation: “AI will be a difference maker… optimize portfolio and promotional spending” and initiatives to incubate more H2/H3 innovations for premiumization and category growth .

What Went Wrong

  • Gross margin contracted YoY to 60.1% (−50 bps), driven by higher raw materials and tariffs; CFO: raw material inflation impact ~420 bps vs 140 bps last year .
  • North America remained cautious with softer category trends; operating margin in NA fell to 18.9% (−170 bps), and operating profit declined 9% YoY .
  • LATAM reported −4.8% reported sales (FX −8.2%) despite +3.4% organic; category deceleration in Brazil and FX headwinds necessitated price actions late in Q2 .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Billions, GAAP)$4.944 $4.911 $5.110
Diluted EPS (GAAP, $)$0.90 $0.85 $0.91
Diluted EPS (Base Business, $)$0.91 $0.91 $0.92
Gross Profit Margin (%)60.3% 60.8% 60.1%
Operating Margin (%)21.5% 21.9% 21.1%

Q2 2025 Actuals vs Wall Street Consensus (S&P Global)

MetricConsensus*Actual
Revenue ($USD Billions)$5.035*$5.110
GAAP Diluted EPS ($)$0.895*$0.91
EBITDA ($USD Billions)$1.223*$1.217*

Values marked with * retrieved from S&P Global.

  • Bold beats/misses: Revenue beat (+$0.075B*); EPS beat (+$0.015*–$0.025*, rounding); EBITDA essentially in line/slight miss.
  • Context: estimate counts for Q2 were 11 for revenue and 15 for EPS*, indicating solid analyst coverage*.

Segment Breakdown (Q2 2025)

SegmentNet Sales ($MM)Operating Profit ($MM)Op Margin (%)
North America$1,027 $194 18.9%
Latin America$1,207 $367 30.4%
Europe$738 $184 25.0%
Asia Pacific$687 $187 27.2%
Africa/Eurasia$295 $65 22.0%
Hill’s Pet Nutrition$1,157 $264 22.9%
Total Company$5,110 $1,080 21.1%

KPIs

KPIQ4 2024Q1 2025Q2 2025
Global Toothpaste Share (%)41.4 40.9 41.1
Global Manual Toothbrush Share (%)32.2 31.9 32.4

Geographic Growth Mix (Q2 2025 YoY)

RegionNet Sales YoYOrganic Sales YoYVolume (Org)PricingFX
North America−1.0%−0.9%−0.4%−0.5%−0.1%
Latin America−4.8%+3.4%+0.4%+3.0%−8.2%
Europe+7.8%+2.0%−0.2%+2.2%+5.7%
Asia Pacific+0.8%—−1.6%+1.6%+0.9%
Africa/Eurasia+8.0%+7.7%+4.3%+3.4%+0.2%
Hill’s+3.8%+2.0%−0.9%+2.9%+0.8%

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Net Sales Growth (GAAP)FY 2025Up low single digits; FX low-single-digit negative Up low single digits; FX flat to low-single-digit negative FX headwind moderated
Organic Sales GrowthFY 20252%–4% Low end of 2%–4% (incl. planned exit from private label pet) Narrowed to low end
Gross Margin (GAAP/Base)FY 2025Roughly flat % of sales Roughly flat % of sales Maintained
Advertising (% of sales)FY 2025Roughly flat Roughly flat Maintained
EPS (GAAP/Base)FY 2025Up low single digits Up low single digits Maintained
DividendQ3’25 Payable—$0.52 per share, payable Aug 15, 2025 Maintained cadence

Earnings Call Themes & Trends

TopicQ-2 (Q4 2024)Q-1 (Q1 2025)Current (Q2 2025)Trend
AI/Technology in RGMScaling digital/data/analytics; margin expansion supports reinvestment Flexibility in P&L to invest; tariffs embedded in outlook “AI will be a difference maker” for RGM and innovation; omnichannel demand generation emphasized Increasing AI deployment and capability build
Supply Chain/Productivity2022 GPI tailwind; disciplined reinvestment Reaffirmed margin/advertising balance New 3‑yr productivity program ($200–$300M) to optimize supply chain, fund innovation Proactive restructuring to fund growth
Tariffs/MacroFX/tariffs flagged; categories stable/full‑year growth Tariffs/FX headwinds updated; guidance set with volatility Tariffs lower than prior expectations, but raw materials up; gross margin guided roughly flat Macro pressures persist; mitigations in place
Product PerformanceOrganic growth across divisions Organic +1.4%; Base EPS +6% Organic +1.8%; Hill’s strong ex private label; Total relaunch global rollout Sequential organic improvement
Regional TrendsBroad growth; Hill’s strong Europe +5.4% organic; LATAM +4.0% organic NA cautious but improving; LATAM FX drag; Europe pricing/FX positive; Asia softness (China JV, India urban) Mixed: FX headwinds and selective softness

Management Commentary

  • “AI will be a difference maker for us in our RGM efforts as we work with our retail partners to use data analytics and machine learning to optimize our portfolio and promotional spending” — Noel Wallace .
  • “Gross margin was down year over year… driven by greater raw material inflation and tariffs… palm, veg oils and fats, and tallow all have moved higher” — CFO Stan Sutula .
  • “We stopped producing private label as of July… impact will be closer to 80–90 bps” (Hill’s) — CFO Stan Sutula .
  • “We’re going to invest in getting omnichannel correct… bring [marketing/commercial] to a more harmonious view… accelerate AI into our innovation process” — Noel Wallace .

Q&A Highlights

  • Productivity program: $200–$300M charges over 3 years to fund innovation, AI/data analytics, and supply chain optimization; limited 2H’25 P&L impact; savings expected in range of past initiatives .
  • Margin outlook: Gross margin roughly flat for 2025 as lower tariff exposure is offset by higher raw materials and softer organic sales in some markets .
  • Hill’s outperformance: Mid‑single‑digit organic ex private label, with stronger therapeutic mix; private label exit in July with 80–90 bps impact in 2H .
  • Regional dynamics: NA consumer caution but improving volume; LATAM pricing actions amid FX; Europe positive pricing/FX; Asia softness in China JV and India urban channels with targeted innovation and price‑pack changes .
  • Pricing and premiumization: Colgate Total regimen relaunch in ~75 markets driving premium share; balancing price‑pack architecture at opening/mid/premium tiers .

Estimates Context

  • Q2 2025 vs consensus: revenue $5.11B actual vs $5.03B estimate*; GAAP EPS $0.91 actual vs $0.895 estimate*; EBITDA $1.217B* actual vs $1.223B* estimate. Values retrieved from S&P Global.
  • Forward quarters: EPS consensus mean Q3’25 $0.889*, Q4’25 $0.915*, Q1’26 $0.945*; revenue consensus ~$5.129B*–$5.151B*; target price consensus mean ~$87.26* (19 estimates*). Values retrieved from S&P Global.

Key Takeaways for Investors

  • Beat on revenue and EPS vs consensus; margins compressed on raws/tariffs but guided roughly flat for FY — a prudent balancing act in a volatile backdrop *.
  • Organic growth sequentially improved; Hill’s remains a structural strength, with private label exit increasing mix quality despite near‑term headwind .
  • New productivity program should fund AI/RGM and innovation while enabling medium‑term savings — watch for execution milestones and disclosure cadence .
  • Regional mix: consider FX/volume sensitivities; Europe strong pricing/FX, LATAM FX drag with pricing offsets, NA cautious but improving, Asia requires JV/urban channel fixes .
  • Expect estimates to drift toward low end of organic growth range given guidance change; monitor raws (oils/fats) and tariff developments as key margin drivers *.
  • Tactical trade: near‑term upside tied to proof of H2 acceleration (innovation launches, RGM pricing/mix) and evidence of raw material easing; downside risks are prolonged category softness and persistent input inflation *.
  • Dividend continuity ($0.52) underscores cash return discipline amid investment cycle .

Values marked with * retrieved from S&P Global.