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Colgate-Palmolive's Shares Fall 16% as Declining Euro Drags Down Sales

September 15, 2000|From Bloomberg News, Times Staff

The slumping euro currency's corporate victims are beginning to pile up.

Colgate-Palmolive Co.'s shares (ticker symbol: CL) tumbled 16% on Thursday after analysts said the world's largest toothpaste maker was warning them that third-quarter sales will rise less than expected because of the falling euro.

The stock's plunge--down $8.75 to $47.44 on NYSE--occurred even though Colgate put out a statement saying it still expects to meet analysts' consensus earnings estimate of 43 cents a share this quarter.

A number of major U.S. multinationals--including DuPont (DD) and McDonald's (MCD)--have warned in recent weeks that the euro's slump this quarter to recent record lows would hurt their results in Europe.

A weak euro means earnings generated in euros translate into fewer dollars when brought home to the U.S. Colgate gets 21% of its revenue from Europe.

Colgate's expected sales shortfall was reported Thursday by analysts at Donaldson, Lufkin & Jenrette, Credit Suisse First Boston and Merrill Lynch, among other brokerages.

While the sales decline will cut Colgate's profit by about 5 cents a share in the quarter, a lower-than-expected tax rate will help the company meet the 43-cent earnings forecast, analysts said.

Still, that didn't stop some analysts from cutting their ratings on the stock.

Andrew Shore of Deutsche Banc Alex Brown lowered his rating on Colgate to "market perform" from "buy."

Worries about the euro's effect on profits appear to have hurt even some companies that have said nothing about their expected results, including Kimberly-Clark (KMB) and Gillette (G).

"People are ratcheting down sales growth rates because of the euro," said Charles White, president of Avatar Associates, which holds about 170,000 Colgate shares.

"The market doesn't have any tolerance when numbers get cut," White said.

McDonald's said this week it expects the decline in the euro and the British pound to hurt profit this year by 7 cents a share, 2 cents more than it had previously forecast.

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Where Euro Fears Are Hitting

Shares of these U.S. multinational companies have been among the hardest-hit in recent weeks on concerns about the weak euro's effect on the companies' near-term earnings.

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Change Ticker Thurs. close since Company symbol and change Sept. 5 Kimberly-Clark KMB $51.00, -$2.88 -13.5% DuPont DD 40.69, -0.31 -11.8 Coca-Cola KO 51.00, -1.50 -9.4 Colgate-Palmolive CL 47.44, -8.75 -9.0 McDonald's MCD 27.25, +0.06 -8.2 Intl. Flavors IFF 23.63, -1.72 -8.2 Gillette G 29.38, -1.44 -8.0 Nike NKE 38.50, unch. -7.7 Philip Morris MO 27.44, -0.69 -7.6 S&P 500 1,480.87,-4.04 -1.7

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Source: Bloomberg News, Times Research

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