reported a rise in third-quarter profit, helped by sales of core dental care products, but investors weren't impressed.
Shares of Colgate were down $3.81, or 6.6%, at $53.95 following some downbeat analyst comments.
The company posted earnings of $365.4 million, or 63 cents a share, up from $330.7 million, or 57 cents a share, in the prior-year quarter. Total sales increased 0.6% to $2.52 billion, slightly ahead of analysts' consensus. Operating profit margin fell to 21.2% from 21.6% last year.
The company said its flagship toothpaste brand, Colgate Total, had volume increases of 9% in the U.S. and 8% worldwide. North American sales fell 3.5%, however, while unit volume in the region declined 3%. Operating profit in North America dropped 13%, resulting from high levels of commercial investment in supporting new products, the company said.
Deutsche Bank analyst Andrew Shore called the company's quarter "sloppy" with "a few bright spots." The analyst, who has a hold rating on the company, noted that results in North America were below expectations and said the rise in sales was largely due to currency translation.
"The intense promotional environment and
Procter & Gamble's
push in oral care is causing some serious pain in North America," Shore wrote in a research note. Deutsche Bank does investment banking for Colgate.
Carol Warner Wilke, an analyst at Merrill Lynch, agreed that Colgate's quarter left something to be desired. "Although Colgate's EPS for the quarter was as expected, the way it got there was through a significantly lower tax rate," she said. By Wilke's calculations, the tax rate -- which was 27.6% -- added 3 cents a share to earnings. In all, the analyst is now "concerned about volume momentum, heavy spending, margin expansion deceleration and inventory build." Wilke has a neutral rating on Colgate. Merrill Lynch has an investment banking relationship with Colgate.
Looking ahead, Colgate said it expects 2003 to be the company's eighth year of double-digit EPS growth. And in 2004, Chief Executive Reuben Mark believes the company will have its ninth consecutive year of earnings growth. Analysts are calling for $2.46 a share in 2003 and $2.73 a share in 2004. The company earned $2.19 a share in 2002.