Colgate-Palmolive dives as sales underwhelm

Colgate-Palmolive shares had their biggest one-day drop since July 2010 after the consumer products company said fourth-quarter sales missed analysts’ estimates and cautioned that global uncertainty and currency issues would remain a challenge this year.

The New York-based company behind Colgate toothpaste and Brite detergent said sales fell 4.5 per cent year on year to $3.7bn, missing analysts’ estimates of $3.9bn, as the strength of the US dollar and India’s demonetisation scheme dragged on results. Revenues declined in Latin America, Europe, Asia Pacific and Africa but were unchanged in North America.

Organic net sales, which exclude the impact of foreign exchange, acquisitions and the deconsolidation of its operations in Venezuela, grew 1.5 per cent. Nevertheless, that still came in shy of the 4.7 per cent figure that Wall Street was looking for and was the weakest pace of growth since the first quarter of 2011, with Mark Astrachan, an analyst at Stifel, calling it “the biggest sales miss in recent memory”.

The news sent Colgate shares down 5.2 per cent to $64.68 on Friday, leaving it among the biggest decliners on the S&P 500.

However, Colgate did swing to a profit of $606m, or 68 cents a share, in the three months ended in December, compared with a loss of $458m, or 51 cents a share, in the year-ago period. Adjusting for one-time items, earnings of 75 cents a share were in line with estimates.

Looking ahead the company said “uncertainty in global markets and foreign exchange volatility” remained a challenge and it expected low single-digit net sales and earnings per share growth in 2017.

The sell-off in Colgate shares accompanied modest declines in the broader US stock market. At the close of trade, the S&P 500 was down 0.1 per cent to 2,294.6, the Dow Jones Industrial Average was flat at 20,093.7, while the Nasdaq Composite gained 0.1 per cent to 5,660.7.

It was a softer tone that contrasted the strong gains made in the first days after President Donald Trump took office and revived growth expectations through actions deemed broadly positive for the US economy by investors.

Chevron reported earnings well below expectations, suffering a fall in profits from its refineries. Its stock price gave up 2.4 per cent to $113.79.

Earnings per share were 22 cents for the quarter, compared with an average forecast of 64 cents. The company reported a loss of 31 cents per share for the fourth quarter of 2015, hit by a writedown in asset values.

Revenues for the fourth quarter of 2016 were also less than expected at $31.5bn, up 8 per cent from the equivalent period a year earlier.

John Watson, chief executive, said in a statement that Chevron’s 2016 results had been affected by low oil and gas prices, but the company had “responded aggressively” by cutting capital spending and operating costs.

The fall accompanied a broader decline among energy companies, as the price of Brent crude dropped 1.3 per cent to $55.52. The S&P 500 energy sector stood as the worst performer in the index, down 0.9 per cent.