Will Colgate's Upcoming Report Make Its Investors Smile?

2013 was a phenomenal year for Colgate-Palmolive and its investors hope for a similar performance in 2014. Its stock rose 24.76%, or a 27.3% return including the $1.33 in dividends paid, but both of these returns underperformed the S&P 500's 29.69% gain. The 208-year-old company's stock currently sits just a few points below its 52-week high. Colgate-Palmolive will soon release earnings, so let's see if we should be buying it now or if we should wait for the next pullback.

Serving America since 1806 Colgate-Palmolive is a leading global consumer-goods company with a focus on oral care, personal care, home care, and pet nutrition. Its brands include Colgate, Palmolive, Speed Stick, Softsoap, Irish Spring, Protex, Hill's, and numerous others. The company sells products in over 200 countries and territories, which gives it one of the largest footprints of any public company.

The October report On Oct. 24, Colgate released third-quarter results that were mixed in comparison with analyst expectations. Here's a summary of the report:

Earnings per share increased 5.8% and revenue rose 1.5% year over year as global unit volume grew 5%. Colgate's gross profit increased 2.2% to $2.585 billion as its gross margin expanded 40 basis points to 58.8%. Although these key metrics are impressive for an established giant like Colgate, the most notable statistics came in the updated global market share report given by the President and CEO, Ian Cook; here are those updated numbers:

Expectations & what to watch for Colgate's fourth-quarter results are due out before the market opens on Jan. 30 and estimates call for growth on both the top and bottom lines. Here's an overview of the expectations:

These estimates call for Colgate's earnings per share to increase 6.4% and revenue to rise 2.7% year over year. Other than these key metrics, it is important to watch whether Colgate shows growth in all of its geographic regions or segments; in the third quarter, it reported sales growth in North America, Europe and the South Pacific, Asia, Africa and Eurasia, and its Hill's Pet Nurtrition segment, but sales declined in its largest region, Latin America. Latin America made up 29% of sales for the company in the third quarter, so it is crucial for Colgate to get this region back in positive territory.

Also, watch the aforementioned Hill's Pet Nutrition segment closely, as it currently makes up 12% of Colgate's total sales. Its new brands, like Hill's Ideal Balance, Hill's Science Diet, and Hill's Prescription Diet, are showing strength in the marketplace, so this segment could end up passing Asia as the company's fourth-largest segment by 2015. The American Pet Products Association predicts that Americans will spend over $21.25 billion on pet food in 2014, so if Hill's can continue to innovate, it could become the high-growth segment that Colgate needs.

Industry strength: a good sign Church & Dwight and GlaxoSmithKline , two of Colgate's largest competitors in the oral-care market, have shown strength over the last several quarters. Church & Dwight's oral-care products include Arm & Hammer toothpastes and results for these products appear in its personal-care segment; in Church & Dwight's most recent earnings report, this segment grew revenues an impressive 39%. GlaxoSmithKline is most known for its prescription medicines and vaccines, but it also owns popular oral-care brands like Aquafresh and Sensodyne. In its latest earnings report, Glaxo's oral-care segment increased sales 6% to EUR 476 million, driven by 14% growth in its Sensodyne Sensitivity and Acid erosion business.

Investors may see the growth of Church & Dwight and GlaxoSmithKline as bad for Colgate, and this is accurate, but I also see the positive side: the strengthening consumer. When the economy is bad, people are more tight with money and they try to cut back on certain things or go for generic brands if possible; a perfect example of this was when Walgreen came out with its own version of Sensodyne's Pronamel, Walgreens Sensitive Dura-namel Anticavity Fluoride Toothpaste. However, as the economy continues to recover and the consumer strengthens, brand names like Colgate, Arm & Hammer, and Sensodyne will be purchased more often, driving Colgate's earnings higher.

The Foolish bottom line Colgate-Palmolive is one of the greatest companies in American history and its 45% market share in the toothpaste category shows that it is here to stay. It is set to report fourth-quarter earnings in a few days and I believe it can easily meet Wall Street's expectations. Colgate-Palmolive is just a few points from its 52-week high, so I would be a buyer on any substantial pullback before the report, or wait for weakness after the release to initiate a position.

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The article Will Colgate's Upcoming Report Make Its Investors Smile? originally appeared on Fool.com.

Joseph Solitro has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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