Colgate-Palmolive's Earnings Outlook and Stock Momentum: Is It a Buy Ahead of August Earnings?

A Delicate Balance: Earnings, Momentum, and Market Sentiment

As Colgate-Palmolive (CL) approaches its Q2 2025 earnings report on August 1, investors are left to navigate a complex landscape of expectations, technical indicators, and market sentiment. The toothpaste giant, long known for its stable dividends and consistent performance, now finds itself at a crossroads where fundamentals and technicals tell different stories. The question is not just whether the company can beat expectations, but whether the market will respond to any surprises with a meaningful shift in sentiment.

Earnings Expectations: A Cautious Optimism

Analysts are currently forecasting that Colgate-Palmolive will report earnings of $0.89 per share for the second quarter of 2025, representing a 2.2% year-over-year decline. This would bring the company's revenue to $5.06 billion, flat compared to the same quarter in 2024. While these numbers suggest a modest slowdown, they are not indicative of a crisis. In fact, Colgate has exceeded expectations in four of the last four quarters, including a 5.81% surprise in the most recent quarter.

The Zacks Consensus EPS estimate has been revised slightly upward in recent weeks, but the "Most Accurate Estimate" is lower than the Zacks Consensus, indicating a bearish shift in analyst sentiment. This divergence creates a nuanced picture: while the company has a history of outperforming, the market is now more cautious.

The negative Earnings ESP (Expected Surprise Prediction) of -0.11% further reinforces this caution. Investors are advised to watch closely for any signs that the company is adjusting its guidance or providing insights into how it plans to navigate ongoing challenges such as tariffs and macroeconomic uncertainties.

Momentum Indicators: A Tale of Two Signals

From a technical perspective, Colgate-Palmolive's stock has shown mixed signals in recent weeks. The 14-day RSI is at 27.75, which is in the oversold territory (below 30). This suggests that the stock may be undervalued and could experience a price reversal or bounce. However, other technical indicators are bearish.

The stock has triggered a MACD Death Cross and a KDJ Death Cross on its 15-minute chart, both of which are bearish signals indicating a potential downward shift in momentum. The Bollinger Bands on the 15-minute chart are narrowing, further suggesting a reduction in price volatility and the potential for a continuation of the downward trend.

While the stock is showing strong momentum characteristics in terms of earnings revisions and recent price performance, the technical indicators in July 2025 pointed to a shift in momentum toward the downside. This creates a mixed outlook for the stock.

Historically, a strategy of buying Colgate-Palmolive when the RSI is in oversold territory and holding for 30 trading days has underperformed the market. From 2022 to the present, this approach yielded a total return of -16.01%, significantly lagging behind the benchmark's 32.25% return. The strategy exhibited a negative Sharpe ratio (-0.38) and high volatility (12.64%), indicating poor risk-adjusted returns. These results suggest that relying solely on RSI oversold signals may not be a reliable short-term trading approach for CL.

Institutional Investors and Analysts: A Split Decision

The investment community is divided on Colgate-Palmolive. Analysts have provided mixed ratings, with one sell rating, nine hold ratings, and seven buy ratings. This results in a consensus rating of "Hold" and an average price target of $101.08. Institutional investors, including hedge funds, own 80.41% of the company's shares, with some recent activity indicating a growing stake by Woodline Partners LP.

Colgate-Palmolive has a market capitalization of $71.26 billion, a P/E ratio of 24.84, and a dividend yield of 2.37%. The company recently increased its quarterly dividend to $0.52 per share, with the next payment scheduled for August 15 to shareholders of record as of July 18. This consistent dividend policy has long been a draw for income-focused investors.

Strategic Moves and Market Position

Colgate-Palmolive has been active in terms of strategic growth initiatives. The company recently acquired Prime100, a pet care brand, and has appointed new executive leadership to strengthen its operational capabilities. It has also been investing in geographic diversification and product innovation, such as the relaunch of Colgate Total and the introduction of ActiveBiome technology in Hill's Science Diet.

These initiatives are expected to support the company's performance as it navigates challenges such as tariffs and macroeconomic uncertainties. However, the effectiveness of these strategies will become clearer after the Q2 earnings report.

Conclusion: A Wait-and-See Approach

The upcoming earnings report on August 1 will be a crucial moment for Colgate-Palmolive investors. The company's performance in the second quarter will provide important insights into its ability to navigate current market conditions. Given the mixed signals from both fundamental and technical analysis, a cautious approach appears appropriate.

Investors who are already holding the stock may want to consider a "hold" strategy, watching for confirmation of either a continued downward trend or a potential reversal. For new investors, it might be prudent to wait for clearer signals after the earnings report before making any significant commitments.

If the stock does show signs of a reversal after the earnings report, it could represent an interesting opportunity for long-term investors who are looking for a company with a strong brand, consistent performance, and a history of paying dividends. However, given the current uncertainty and the bearish technical indicators, it's difficult to recommend an aggressive buy strategy at this time.

In the end, Colgate-Palmolive remains a company with strong fundamentals and a solid market position, but the current market conditions and technical indicators suggest that caution is warranted. The key will be watching how the company performs in the coming weeks and how the market reacts to its Q2 earnings report.