Colgate-Palmolive (CL) shares initially declined to $63.43 on Friday after fourth quarter diluted EPS from continuing operations rose 0.3%, but the company cut its full-year outlook. Today’s 5.22% stock price decline to $64.68 occurred after the company reported earnings of $0.75 a share, in line with the analysts’ consensus. Revenue dropped 1.4% to $3.72 billion and missed expectations of a $3.84 billion print. The market focused on the cut in 2017 EPS guidance from double digit growth to low-single digit growth. The company also guided revenue to have low-single digit growth.
The CEO Cook noted, "In the face of continued challenging macroeconomic conditions worldwide, foreign currency headwinds accelerating versus expectations, slowing category growth in several key markets and India's demonetization, we achieved another quarter of organic sales growth. While net sales declined 4.5%, worldwide organic sales grew 1.5% led by emerging markets where organic sales grew 4.5%."
Price action on the CL daily chart shows that initial drop took out both the heavily tested $64.40 level and well below the 50-day SMA. Price did manage to respect the 2016 low of $61.40 and is currently above the noted $64.40 level. If we see further downward pressure, price may target the $62.00 level. It is around that area that price could form a bullish ABCD pattern. If valid, we could see price attempt to recapture the 50-day SMA, which currently trades at the $66.28 level. Major resistance remains the $70 handle.
The Trade: Buy CL at $62.25, with a stop loss at $61.25 and a take profit at $65.25. The Risk/Reward Ratio is 1:3