Corrections and expectations

Whenever a stock is making a big move, it can be helpful to consult different time fames to put things in perspective.

Colgate-Palmolive (CL) is coming off back-to-back down months for the first time since September 2023, falling 9.7% in October alone. Although the stock has rebounded so far this week, shares are still just a little above the four-and-a-half-month low they hit last Friday:

At that point, CL was down more than 14% from its September 4 record close, with a not-insignificant chunk of that loss coming after the company’s October 25 earnings release. Shares closed down 4.4% that day, and as of Friday had fallen an additional 2.4%.

And the numbers? During earnings season, it’s common to see a company top its headline numbers but sell off because it disappointed the Street with its forward guidance—its estimates of future earnings, revenues, and other key metrics. In this case, though, CL topped its headline numbers and upped (slightly) its forward guidance.¹

As relatively large as the current correction appears, it benefits from some longer-term context. A monthly chart shows that it was preceded by a 50% rally that saw CL shares close higher for 11 consecutive months:

If some traders could argue that the rally was “overdone,” that happened to be the same word Morgan Stanley & Co. analysts used last week to describe CL’s post-earnings sell-off, given the “high-quality” nature of the numbers it reported.² Among the factors they cited for their more optimistic outlook: expectations for sustained greater growth vs. peers, pricing power, exposure to higher-growth emerging markets (45% of sales mix), and gain of market share.

Market Mover Update: One stock that topped its headline earnings numbers but did disappoint on guidance—Cirrus Logic (CRUS), which fell nearly 10% intraday on Tuesday before paring its losses. Three options with high volume on October 24—the November $105, $115, and $120 puts—all more than doubled in price (see “Pre-earnings put play?”).

For a fifth-straight day, Amkor Technology (AMKR) traded entirely within the range of its October 29 wide-range sell-off day (see “Gauging a sell-off”).

Today’s numbers include: FOMC meeting begins, mortgage applications (7 a.m.), EIA Petroleum Status Report (10:30 a.m.).

Today’s earnings include: Novo-Nordisk (NVO), Arm Holdings (ARM), Duolingo (DUOL), E.L.F. Beauty (ELF), Lyft (LYFT), Match Group (MTCH), Qualcomm (QCOM), Royal Gold (RGLD), SolarEdge Technologies (SEDG), Workiva (WK), Zillow (ZG).

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¹ Reuters. Colgate-Palmolive lifts lower end of 2024 results forecast on steady demand. 10/25/24.
² MorganStanley.com. Reiterate OW: Stock Pullback Offers Opportunity with a High Quality Q3 Further Confirming CL Growth Potential Above Peers. 10/28/24.