Can Colgate's Pricing Strength Keep Earnings Buoyant in 2025?

Core Insights - Colgate-Palmolive Company (CL) is effectively utilizing its pricing power to drive growth and alleviate external cost pressures through a multifaceted pricing strategy [1][10] Pricing Strategy - The company employs competitive pricing, value-based strategies, and price segmentation to cater to diverse consumer needs while optimizing value [1][2] - Colgate's pricing actions, combined with its funding-the-growth program and productivity initiatives, are enhancing efficiency and expanding margins [2] Financial Performance - In Q1 2025, Colgate's adjusted gross margin increased by 80 basis points (bps) and operating margin expanded by 120 bps year over year, resulting in a 6% growth in adjusted earnings per share (EPS) [3] - The company anticipates pricing gains of 2.5% for 2025, with an expected flat gross margin and low single-digit EPS growth [3][4][10] Competitive Landscape - Major competitors in pricing power include Procter & Gamble (PG), Clorox (CLX), and Church & Dwight (CHD) [5] - Procter & Gamble's pricing strategy focuses on value-based pricing to maintain market share and reduce reliance on promotional discounts [6] - Clorox has achieved a 240 bps expansion in gross margin year over year, driven by strategic pricing and cost-saving measures [7] - Church & Dwight is enhancing its market position through strategic pricing and innovation, gaining market share in nine of its 14 major brands [8] Valuation and Estimates - Colgate's shares have increased by 0.7% year to date, contrasting with a 3.2% decline in the industry [9] - The company trades at a forward price-to-earnings ratio of 24.17X, higher than the industry average of 20.19X [11] - The Zacks Consensus Estimate predicts year-over-year EPS growth of 1.7% for 2025 and 7.3% for 2026, with stable EPS estimates over the past 30 days [12]