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COLGATE PALMOLIVE CO (CL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered modest growth with net sales up 2.0% to $5.13B and organic sales up 0.4% (pressured ~80 bps by the exit of private label pet), while diluted EPS was $0.91; gross margin compressed 170 bps YoY to 59.4% and operating margin fell 60 bps to 20.6% .
  • Versus S&P Global consensus, CL posted a small beat on EPS ($0.91 vs $0.889*) and revenue ($5.131B vs $5.129B*), but EBITDA was slightly below ($1.196B vs $1.219B*) as commodities (fats/oils), tariffs, and transactional FX weighed on margins (Values retrieved from S&P Global) .
  • Full-year guidance was tightened/lowered on organic growth to 1–2% (from “low end of 2–4%” previously), while net sales “up low single digits,” gross margin “roughly in line with YTD 60.1%,” advertising “roughly flat,” and EPS “up low single digits” were maintained .
  • Call tone focused on executing the 2030 strategy, scaling AI-driven innovation, omnichannel demand generation, and revenue growth management to re-accelerate growth despite a sluggish category backdrop; catalysts ahead include normalization after the Latin America Colgate Total formula fix and Hill’s private-label exit rolling off comps .

What Went Well and What Went Wrong

What Went Well

  • Resilient top-line and EPS vs consensus: EPS $0.91 beat ($0.889*) and revenue $5.131B beat ($5.129B*), reflecting disciplined RGM and pricing across all divisions (Values retrieved from S&P Global) .
  • Europe outperformed with net sales +7.6% and OP margin +180 bps YoY to 26.1%, supported by sustained pricing and strong Western Europe performance .
  • Strategic narrative sharpened: management emphasized science-based innovation, omnichannel demand, and expanding AI/agentic AI to drive category growth, margin productivity, and speed-to-market. “We have made and are continuing to make the changes that are required to drive outperformance…,” Noel Wallace noted .

What Went Wrong

  • Margin pressure: gross margin -170 bps YoY (59.4%) from fats/oils inflation, weaker fixed-cost leverage on lower volumes, tariffs, transactional FX, and Latin America formula change costs; management guides FY gross margin roughly in line with 60.1% YTD .
  • Organic growth softness: Q3 organic +0.4% with North America -0.5% organic and volume declines across several divisions; management cut FY organic to 1–2% (from low end of 2–4%) .
  • Hill’s mixed: ex-private label grew ~2.5% organically, but private label exit was a ~300 bps headwind and e-commerce destocking weighed; overall Hill’s organic -1.3% in Q3 .

Financial Results

Consolidated P&L and KPIs (sequential quarters)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$4.911 $5.110 $5.131
Diluted EPS ($)$0.85 $0.91 $0.91
Gross Profit Margin (%)60.8% 60.1% 59.4%
Operating Margin (%)21.9% 21.1% 20.6%
Organic Sales Growth (%)1.4% 1.8% 0.4%
Advertising ($USD Millions)$668 $678 $674

Actual vs S&P Global Consensus

MetricQ2 2025 ActualQ2 2025 Consensus*Q3 2025 ActualQ3 2025 Consensus*
Revenue ($USD Billions)$5.110 $5.035*$5.131 $5.129*
EPS ($)$0.91 $0.895*$0.91 $0.889*
EBITDA ($USD Billions)$1.217 (approx. $1,217M) $1.223*$1.196 (approx. $1,196M) $1.219*
Note: Values retrieved from S&P Global. Asterisks denote S&P Global consensus or actuals from the S&P dataset. EBITDA actual reference is discussed by management in margin commentary; consensus values from S&P Global estimates tool (Values retrieved from S&P Global) .

Segment Breakdown – Q3 2025 vs Q3 2024

SegmentNet Sales Q3’25 ($MM)Net Sales Q3’24 ($MM)YoY Net Sales %Operating Profit Q3’25 ($MM)OP Margin Q3’25YoY OP %/bps
North America$999 $1,004 -0.4% $190 19.0% -8% / -150 bps
Latin America$1,178 $1,156 +2.0% $337 28.6% -8% / -300 bps
Europe$801 $744 +7.6% $209 26.1% +16% / +180 bps
Asia Pacific$714 $725 -1.5% $188 26.2% -6% / -120 bps
Africa/Eurasia$297 $278 +6.8% $68 23.0% +5% / -40 bps
Hill’s Pet Nutrition$1,142 $1,126 +1.4% $255 22.4% -1% / -50 bps
Total Company$5,131 $5,033 +2.0% $1,059 20.6% -1% / -60 bps

Additional KPIs

KPIQ3 2025
Global Toothpaste Share (YTD)41.2%
Global Manual Toothbrush Share (YTD)32.4%
Net Cash from Operations (9M)$2,745M
Free Cash Flow before Dividends (9M)$2,358M
Total Debt$8,419M
Cash & Equivalents$1,279M
Working Capital % of Sales(4.0%)

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2)Current Guidance (Q3)Change
Net Sales GrowthFY 2025Up low single digits (incl. flat to LSD FX headwind) Up low single digits (incl. flat to LSD FX headwind) Maintained
Organic Sales GrowthFY 2025Low end of 2%–4% 1%–2% (≈70 bps headwind from pet private label exit) Lowered
Gross Profit Margin (GAAP & Base)FY 2025Roughly flat as % of sales Roughly in line with YTD 60.1% Maintained/clarified
Advertising as % of SalesFY 2025Roughly flat Roughly flat Maintained
EPS (GAAP & Base)FY 2025Up low single digits Up low single digits Maintained
FX ImpactFY 2025Flat to low-single-digit negative Flat to low-single-digit negative Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
AI/TechnologyFocus on productivity program to support 2030 strategy; less explicit AI emphasis in releases Deep focus on AI/agentic AI for innovation, marketing content, demand planning, and RGM; AI hubs launched Increasing priority
Supply ChainNew 3-year productivity program to optimize global supply chain Using predictive analytics/automation across supply chain; aim for flexibility and personalization Capability scale-up
Tariffs/MacroGuidance embeds tariffs and FX headwinds Tariffs and transactional FX cited as gross margin headwinds; FY guide embeds tariff impact Persistent headwind
Product Performance—LATAM Colgate Total flavor reformulation caused temporary trade replacement; ~150 bps hit to LATAM organic and ~40–50 bps to total GM; shares recovering Transitory issue, improving
Regional TrendsQ1/Q2 organic strengths in Europe; LATAM org growth ex-FX; APAC mixed Europe strong; NA sequentially improved; LATAM mixed; India GST cut (toothpaste 18%→5%) near-term disruption but medium-term positive; China: Colgate e-comm solid, Holly & Hazel challenged Mixed; policy effects
Regulatory/LegalERISA litigation charges in YTD non-GAAP reconciliations Non-GAAP definitions continue to exclude ERISA-related items; program charges to start in Q4 Ongoing adjustments
Pet NutritionPrivate label drag cited earlier (-0.4 to -0.6 pts company impact YTD) Hill’s ex-private label +2.5% organic; ~300 bps headwind from private label exit and some e-comm destock Underlying health solid; headwind rolling off

Management Commentary

  • Strategy/Ambition: “We are taking concrete, intentional steps to accelerate our growth… including a new innovation model… and resources and tools, including AI, to make us faster and better…” — Noel Wallace, CEO .
  • Execution in a sluggish backdrop: “We are well-positioned to outperform in the context of the current global category slowdown… with well-funded advertising and innovation plans and greater focus on RGM and AI.” — Noel Wallace .
  • Margin drivers and outlook: “Year-on-year [gross margin] impact is primarily driven through greater-than-anticipated raw materials inflation… lower fixed cost leverage… tariffs, and transactional FX… We expect full-year gross margin roughly in line with the 60.1% YTD.” — Stan Sutula, CFO .
  • AI as unlock: “We’ve launched AI hubs… a huge unlock to drive productivity… moving into agentic AI to re-engineer processes and drive efficiency.” — Noel Wallace .
  • Latin America formula fix: Colgate Total flavor adjustment in Brazil and other LATAM markets led to temporary trade replacement and ~40–50 bps GM impact; shares are improving post-reformulation — Noel Wallace .

Q&A Highlights

  • Category slowdown: Management views the slowdown as cyclical vs long-term averages; planning to accelerate organic growth even if sluggish conditions persist .
  • Gross margin puts/takes: Fats/oils inflation, tariffs, and transactional FX drove Q3 pressure; Q4 sequential improvement expected as materials ease YoY, with some offset from tariffs .
  • Regional dynamics: Europe pricing remains constructive; North America sequentially improved (ex-skin health); India GST cut disrupted trade short term but seen as medium-term positive; China: strong Colgate e-comm, Holly & Hazel refocusing toward premium online .
  • Hill’s: Ex-private label +2.5% organic in a slow category; headwinds from private label exit (~300 bps) and some e-comm destocking; strong momentum in therapeutic and wet .
  • FX and pricing: FX at current spots could be a tailwind into Q4; positive pricing in every division in Q3 .

Estimates Context

  • Q3 vs S&P Global consensus: EPS $0.91 vs $0.889* (beat); revenue $5.131B vs $5.129B* (inline/slight beat); EBITDA ~$1.196B vs $1.219B* (modest miss) (Values retrieved from S&P Global) .
  • Prior quarter (Q2) vs S&P Global: EPS $0.91 vs $0.895* (beat); revenue $5.110B vs $5.035B* (beat); EBITDA ~$1.217B vs $1.223B* (slight miss) (Values retrieved from S&P Global) .
  • Forward (Q4) consensus: EPS ~$0.915* and revenue ~$5.129B* imply flat sequential revenue and modest EPS uptick; any Q4 improvement will hinge on LATAM normalization, reduced destocking, and commodity/tariff evolution (Values retrieved from S&P Global) .

Key Takeaways for Investors

  • Near-term: Q3 prints were resilient vs consensus, but margin headwinds (fats/oils, tariffs, FX) and soft organic growth keep FY25 framed as “stabilize and execute” with a reset to 1–2% organic growth .
  • Europe strength and broad-based pricing underscore brand health; North America is improving sequentially (ex-skin), while India GST and LATAM formula fix should fade as transitory drags into Q4/2026 .
  • Hill’s fundamentals remain attractive, with private-label headwinds rolling off and capacity enabling mix-up (wet/therapeutic); watch for re-acceleration as comps clean up in 2026 .
  • Execution vector: 2030 strategy + SGPP productivity should fund growth investments while preserving EPS growth; AI/agentic AI adoption across innovation, media, and supply chain is a potential multi-year efficiency and growth unlock .
  • Setup into Q4: Management expects sequential gross margin improvement and organic growth in line with YTD (~1.2%) as destocking eases and LATAM Total relaunch recovers; risk remains from tariffs and commodity volatility .
  • Medium-term thesis: With category growth expected to normalize, CL’s share leadership, RGM capabilities, and AI-enabled innovation engine can re-accelerate organic growth and margins; track gross margin trajectory vs the 60.1% YTD anchor and Europe/Latin America momentum .
  • Stock drivers: Evidence of sustained GM recovery, Hill’s re-acceleration ex-private label, and proof points on AI-driven demand generation could be catalysts; conversely, renewed commodity/tariff pressure or prolonged category softness are risks .