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Growth Prospects
Colgate-Palmolive delivered mediocre EPS growth of 4% and
revenue growth of 3.5% in its most recent third quarter versus the
same quarter a year ago. Despite recent weakness, the company
has a solid history of growth. Colgate-Palmolive has grown EPS
by about 7.8% a year over the last decade. Revenue per share has
grown by 6.6% per year and dividends per share have grown by
10.9% per year over the same time period.
Going forward, I expect Colgate-Palmolive to deliver solid EPS
growth of between 5.5% and 8.5% per year. EPS growth will be
driven by organic growth of between 4% and 6% going forward.
Colgate-Palmolive has reduced its net share count by about 1.5%
per year over the last decade; I expect share count reductions to
add about 1.5% of growth for shareholders. Colgate-Palmolive
has a history of increasing its gross and operating margins
through efficiency gains and price increases. I expect margin
expansion to add between 0% and 1% to growth per year in the
future. In total, shareholders of Colgate-Palmolive can expect
EPS growth of between 6.5% and 8.5%.
Colgate-Palmolives organic growth will come emerging market
growth and new product initiatives in developed markets. The
companys biggest growth drivers will be China and India. Indian
per capita GDP is expected to double by 2020, with China
expecting rapid growth as well. In addition, populations are
expected to continue rising in both China and India. China and
India are expected to lift 700 million people into the middle class
by 2020. This rise in middle-class consumers bodes well for
Colgate-Palmolive. Emerging market growth will fuel the
companys growth going forward.
PRODUCTS
Colgate-Palmolive has a wide line of products in the following areas: personal care, householdand
fabric care, pet nutrition, and assorted specialty items. Colgate-Palmolive's personal care lineincludes
Colgate toothpaste; Mennen, Speed Stick, and Lady Speed Stick deodorants; SkinBracer after shave;
and Irish Spring deodorant and Palmolive cosmetic soaps. Palmolive is also a brand in the
household/fabric care area with its dishwashing liquids and powder. Also includedin this area are
Ajax, Fab laundry detergent, Murphy Oil soap, and Handi Wipes. With theacquisition of Hills Pet
Products in 1976, Colgate-Palmolive entered the pet food business, withspecialty dietary management
products HealthBlend and Science Diet, as well as PrescriptionDiet, a line available only
through veterinarians. Finally, through its subsidiary, Princess House,Colgate-Palmolive manufactures
crystal and giftware.
Chief Competitors:
Colgate-Palmolive's competitors include: American Home Products;Amway; Avon; Gillette;
and Procter & Gamble.
In 1994 the company launched its largest series of new products in a decade: Colgate
Toothpastewith Baking Soda & Peroxide, Irish Spring Waterfall Clean Soap, Palmolive
AntibacterialDishwashing Liquid, and the Murphy Kitchen Care line. In the mid-1990s it also
introducedColgate Plus Ultra Fit Compact Head toothbrushes, and in December 1996 it
introduced LadySpeed Stick Invisible Dry Deodorant. With concerns over germs growing in
the 1990s,antibacterial soaps became popular, and in 1996 Colgate announced the
introduction of IrishSpring Sport, an antibacterial product intended to compete with a "body
wash" produced byProcter & Gamble. The company anticipates continued global success
with present and future products