Colgate-Palmolive (CL) Q3 2026 earnings review
Colgate raises its profit plan, but North America still shrinks
Colgate-Palmolive, the maker of Colgate toothpaste and Hill's pet food, grew faster across developing markets while its North American business kept shrinking. Underlying sales rose 4% as chief executive Noel Wallace pointed to a fourth straight quarter of improving worldwide volume, and profit per share excluding one-offs rose 7% to $0.97, above what the company's prior plan pointed to. Management lifted its full-year profit and margin outlook, but by our math the new plan still has profit growth slowing to about 2% in the fourth quarter.
| Sales from businesses owned a year ago | +3.6% +2.4% last quarter |
|---|---|
| Profit per share, excluding one-offs | $0.97 +7% from a year ago |
| North America volume | -3.7% operating profit -11% |
| Full-year profit outlook (excluding one-offs) | Raised to 5–7% growth (from mid-single-digit) |
⚖️ Verdict: 🟢 Bullish
The story got better because the company finally lifted its full-year underlying sales floor to about 3% alongside a second straight raise to its profit outlook, as pet food volume turned positive and gross margin expanded. One caution: North America underlying sales fell for a seventh straight quarter, with regional volume down 4% and segment profit down 11%, so the home-market turnaround has not arrived.
The question now is whether record advertising spending and selective price hikes can stop the volume loss in North America without giving back margin. Either higher brand spending wins back US shoppers, or weak category demand forces price cuts that eat into next year's cost savings. Fourth-quarter North America volume and segment margin will tell.
🐂 Bull Case
Emerging Markets and Pet Food Carry Growth
Colgate-Palmolive, the maker of Colgate toothpaste, Palmolive soap and Hill's pet food, relies on developing nations and veterinary diets to offset a weak United States market. Chief executive Noel Wallace said sales from businesses owned a year ago rose in all four product categories and four of five divisions.
- Latin America: underlying sales up 6.0% (volume up 3.9%, prices up 2.1%), with reported sales up 12.5% on currency gains
- Hill's Pet Nutrition: underlying sales up 5.7% (volume up 1.8%, prices up 3.9%), despite a 0.2-point drag on company sales from exiting private-label pet food
- Asia Pacific: underlying sales up 4.6% (volume up 1.9%, prices up 2.8%)
- Europe, Middle East & Africa: underlying sales up 2.7% (volume up 3.5%, prices down 0.9%)
The standout change this quarter is Hill's volume. After shrinking 1.8% in the first half because of the private-label exit, underlying pet food volume grew 1.8% in the third quarter, while Latin America operating profit jumped 17% to $392 million.
What to watch: fourth-quarter underlying volume at Hill's Pet Nutrition once the private-label exit finishes lapping. A reading above 2% would show the new fresh pet food line is adding buyers.
Gross Margin Expanded and Profit Plan Rose
Colgate raised its full-year gross margin outlook from roughly flat to up, reversing its first-quarter cut. In the third quarter, gross margin rose 0.8 percentage points from a year ago to 60.2% (or 0.9 percentage points to 60.3% excluding one-offs), as cost of sales fell to 39.8% of revenue from 40.6%.
That expansion beat the 0.6-percentage-point second-half decline implied by the company's prior full-year plan, by our math, helped by the easiest comparison of the year (59.4% in the third quarter of 2025). On the back of wider margins, the household-products maker lifted its full-year outlook for profit per share excluding one-offs to 5% to 7% growth, up from mid-single digits.
What to watch: fourth-quarter gross margin against last year's 60.2%. Staying above 60.2% against a tougher comparison would show cost savings and pricing are still beating raw material inflation.
Global Volume Acceleration Matches Higher Ad Spend
"We were particularly pleased to have delivered our fourth quarter of sequential improvement in worldwide volume growth, while delivering strong pricing growth in the third quarter," chief executive Noel Wallace said. Worldwide volume rose 1.7% from a year ago, up from 0.9% in the second quarter, while prices rose 2.0%.
To drive that volume and support "driving premium, science-based innovation", Colgate delivered "another double-digit increase in advertising this quarter", lifting ad spend 15% from a year ago to $775 million, or 14.4% of revenue. Year-to-date global market share reached 41.4% in toothpaste and 33.1% in manual toothbrushes, up from 41.3% and 32.7% at mid-year. Critics note that selling, general and administrative expenses rose 0.7 percentage points of revenue excluding one-offs to 39.1%, and the release still gives no direct return metric for the extra ad dollars.
What to watch: worldwide underlying volume growth in the fourth quarter. Holding near 1.7% without an easy prior-year comparison would prove the 14.4% advertising spend is winning lasting volume.
🐻 Bear Case
North America Volume Shrank and Profit Dropped
While chief executive Noel Wallace highlighted broad growth across four of five divisions, North America—17% of company revenue—shrank for a seventh straight quarter. Underlying sales in the region fell 1.6% from a year ago and reported sales fell 1.7% to $905 million.
- North America volume: down 3.7% from a year ago, only slightly less negative than the 3.9% drop in the second quarter
- North America pricing: up 2.2%, compared with 0.9% in the second quarter
- North America operating profit: down 11% to $177 million, with segment margin down 2.1 percentage points to 19.5%
The sequential move from a 3.0% underlying sales drop in the second quarter to a 1.6% drop came from higher prices, not shoppers buying more boxes. Because North America volume still fell 3.7% and segment profit dropped 11%, the home-market turnaround remains unproven.
What to watch: North America volume growth and operating margin in the fourth quarter. Another volume drop beyond 3% alongside shrinking segment profit would show price hikes are costing the company unit sales.
Raised Plan Points to Slow Fourth Quarter
Colgate narrowed its full-year reported sales outlook to 4% to 5% growth and raised its outlook for profit per share excluding one-offs to 5% to 7% growth, citing "consumer uncertainty and ongoing macroeconomic volatility". Through the first nine months, however, reported sales are already up 6.0% and profit per share excluding one-offs is up 7.3%.
By our math, the middle of the full-year outlook leaves fourth-quarter reported sales almost unchanged from a year ago (up 0.3%) as the foreign-exchange tailwind fades, and slows fourth-quarter profit per share growth excluding one-offs to about 2.3%, down from 6.6% in the third quarter.
What to watch: fourth-quarter profit per share excluding one-offs against the $0.97 implied by the middle of the full-year plan. A beat above $0.99 would show management padded the fourth-quarter cost outlook.
Restructuring Costs Weigh on Nine-Month Reported Profit
Colgate runs a three-year restructuring plan called the Strategic Growth and Productivity Program, which aims to save $200 million to $300 million a year before taxes by the end of 2028 at a total pre-tax cost of $350 million to $550 million. Some investors view the heavy upfront spending as proof of fast execution.
In the third quarter, pre-tax program charges slowed to $30 million ($26 million after tax, or $0.03 per share), bringing nine-month charges to $333 million and cumulative charges since 2025 to $346 million by our math. Those charges pushed nine-month reported operating profit down 5% to $3,069 million and cut nine-month reported profit per share by $0.33, while the promised cost savings do not arrive until 2027.
What to watch: the initial 2027 outlook in January for selling, general and administrative expenses as a share of sales. A drop from this year's 39.2% would show the $346 million of charges is finally lowering overhead.
Risks This Quarter Didn't Answer
Several standing items from prior quarters cannot be read from the earnings release alone and await the quarterly filing or conference call.
- Global category growth rate: not quantified in the release; the conference call will show whether category growth remains stuck near 2%.
- Darlie toothpaste in Greater China: Asia Pacific underlying sales grew 4.6%, but brand-level performance is not in the release.
- Hill's Fresh US rollout: Hill's volume rose 1.8%, but clinic counts and fresh-diet unit economics are not in the release.
- Talc lawsuits and tax disputes: case counts (525 at mid-year) and Brazil and US tax matters appear only in the quarterly filing's legal note.
💲 Other KPIs
Nine-month free cash flow before dividends—operating cash flow of $2,913 million minus $400 million of capital spending—rose 6.6% from a year ago. By our math, third-quarter free cash flow was $1,037 million, down 6.2% from a year ago after rising 17.9% in the first half, as working capital timing normalized.
Debt minus cash and marketable securities fell 12.1% from $6,947 million a year ago and 7.4% from $6,593 million at the end of 2025. Lower debt cut third-quarter interest expense to $62 million from $67 million a year ago.
Average diluted shares fell 1.3% from 810.2 million a year ago, continuing a steady decline from 805.1 million in the first quarter and 801.8 million in the second. Colgate spent $927 million on share buybacks in the first nine months ($330 million in the third quarter by our math), up 15.3% from a year ago.
🔮 Guidance
Raised at the middle of the range. The consumer-goods group narrowed its plan from 2% to 6%, lifting the middle of the range by 0.5 percentage points to 4.5% growth, including a low-single-digit currency benefit. Because nine-month sales grew 6.0%, the middle of the range leaves fourth-quarter reported sales growth at about 0.3% by our math as currency gains fade.
Raised. Management replaced its 1% to 4% range with an outlook "broadly in line with its nine-month performance" of 3.0%, lifting the middle of the plan by 0.5 percentage points after holding it for two quarters. By our math, that points to about 3.0% underlying sales growth in the fourth quarter, down from 3.6% in the third quarter.
Raised. Both reported and underlying gross margins are now planned to rise for the year, after moving from up at the start of the year to down in the first quarter and roughly flat in the second. Nine-month gross margin is already 60.8%, up 0.7 percentage points from a year ago.
Unchanged. Colgate still plans to raise advertising in both dollars and as a share of sales for the full year. Through nine months, ad spend is up 13.2% to $2,286 million, or 14.2% of revenue versus 13.3% a year ago.
Unchanged. The plan still calls for at least 10% growth off last year's $2.63. Because fourth-quarter 2025 reported profit was $-0.05 per share after a $919 million skin-health write-down, clearing a 10% full-year floor requires only $0.28 per share in the fourth quarter by our math.
Raised. It is the second straight raise, moving from low-to-mid single digits in the first quarter to mid-single digits in the second, and now 5% to 7% (middle of the range: 6.0%). With nine-month underlying profit per share up 7.3% to $2.94, the middle of the plan leaves about 2.3% growth for the fourth quarter by our math.
❓ Key Questions
Why did North America profit fall 11% despite higher prices?
North America pricing rose 2.2%, yet volume dropped 3.7% and segment operating profit fell 11% to $177 million (margin down 2.1 percentage points). How much of the margin drop came from promotional spending or lower factory volume versus raw material costs?
Is the 2.3% implied fourth-quarter profit growth caution or costs?
After growing profit per share excluding one-offs by 7.3% over the first nine months, the 5% to 7% full-year plan leaves about 2.3% growth for the fourth quarter by our math. Does management see a fourth-quarter cost step-up, or is the range conservative?
How much of the $346 million restructuring will cut 2027 overhead?
Cumulative pre-tax charges for the Strategic Growth and Productivity Program have reached $346 million against the $350 million to $550 million target. How much of the $200 million to $300 million annual savings target will reach the bottom line in 2027 versus being reinvested?
What drove Hill's volume back to growth in the third quarter?
Hill's Pet Nutrition underlying volume rose 1.8% after falling 1.8% in the first half. How much of that improvement came from the private-label exit fading versus the new Hill's Fresh rollout and core Science Diet demand?