Colgate's Pricing Strength to Drive Earnings Growth in 2025

Colgate-Palmolive Company is leveraging its pricing power to support growth and mitigate external cost pressures. The company has a multifaceted pricing approach, including competitive pricing, value-based strategy, and price segmentation. Colgate's pricing strategy is backed by ongoing product innovations and launches that drive value and validate premium positioning. The company expects gross margin to be nearly flat year over year and EPS to grow low single-digits for 2025.

Colgate-Palmolive Company (CL) has been effectively leveraging its pricing power to support growth and mitigate external cost pressures. The company employs a multifaceted pricing approach, including competitive pricing, value-based strategy, and price segmentation, to address diverse consumer needs while optimizing value [1].

In the first quarter of 2025, Colgate's pricing improved by 1.5% year over year, driven by positive pricing across its most segmental divisions. This, coupled with its funding-the-growth program and other productivity moves, has led to an adjusted gross margin expansion of 80 basis points (bps) and an operating margin expansion of 120 bps year over year. As a result, adjusted earnings per share (EPS) grew by 6% from the prior-year period [1].

Colgate's pricing strategy extends beyond simple price hikes and controls, bolstered by ongoing product innovations and launches that drive value and validate premium positioning. The company has revamped its innovation model, leveraged its global scale across price tiers, invested in marketing, and reinforced operational capabilities to drive brand health and higher household penetration. These efforts are expected to continue driving sustained growth and profitability [1].

Colgate's competitors, such as Procter & Gamble (PG), The Clorox Company (CLX), and Church & Dwight Co., Inc. (CHD), also employ robust pricing strategies. Procter & Gamble's value-based pricing approach across categories like laundry detergents enables it to reduce dependence on promotional discounts while maintaining competitive pricing and sustaining market share. Clorox's strategic pricing and cost-saving measures have been boosting gross margin in recent periods, with a focus on premiumization and value for consumers. Church & Dwight has been strengthening its market position through a robust brand portfolio, strategic pricing, and innovation, leveraging its strong brand equity to bolster profitability and overall growth [1].

From a valuation standpoint, Colgate's shares have gained 0.7% year to date against the industry's 3.2% dip. The company trades at a forward price-to-earnings ratio of 24.17X compared to the industry's average of 20.19X. The Zacks Consensus Estimate for CL's 2025 and 2026 EPS indicates year-over-year growth of 1.7% and 7.3%, respectively [1].

Colgate currently carries a Zacks Rank #2 (Buy), indicating that the company is expected to outperform the market. However, investors should monitor the company's ability to sustain its pricing strategy and maintain its competitive edge in a dynamic market [1].

References:
[1] https://www.nasdaq.com/articles/can-colgates-pricing-strength-keep-earnings-buoyant-2025