Key financial results
- The company delivered organic sales growth across all four categories and four of its five divisions.
We're clearly pleased to have delivered another quarter of solid top and bottom line growth, particularly in the context of the continued global volatility we're seeing.
- Base Business EPS came in ahead of management expectations.
Base Business EPS came in ahead of our expectations even as we continue to increase our advertising.
- Free cash flow increased by 7% during the third quarter.
- Pricing contributions were 220 basis points in the first quarter, 160 basis points in the second quarter, and 200 basis points in the third quarter.
- The company achieved a 90 basis point improvement in SG&A overhead efficiencies.
Business segment results
- Hill's: Hill's Pet Nutrition delivered 6.5% organic sales growth excluding private label, with gross margin up 170 basis points.
- Hill's: Prescription Diet Dog grew high mid-single digits, while Prescription Diet Cat grew double digits.
- Latin America: Latin America organic sales grew 6%, with volume up 3.9% and pricing up 2%.
- Latin America: Brazil delivered double-digit growth, while Mexico faced a difficult consumer backdrop and specific retailer challenges.
- Asia: Asia Pacific organic sales grew roughly 5%, led by double-digit growth in India.
- Asia: Greater China grew mid-single digits, with the Colgate business up high single digits and the Holly and Hazel business up low single digits.
- North America: North America is a work in progress, but the company is seeing early signs of improvement in toothpaste market share.
- Europe: Europe saw strong execution in premiumization, particularly with the Elmex and Sanex brands.
Capital allocation
- The company returned $2.2 billion to shareholders year-to-date.
Our balance sheet and cash flow performance through the third quarter was also very strong with free cash flow up 7%, and we've returned $2.2 billion to shareholders year-to-date.
Industry trends and dynamics
- Global category growth is in the 1.5% to 3% range, with emerging markets growing 3% to 5% and developed markets growing 1.5% to 2%.
- Categories remain relatively sluggish, but the company expects growth to continue.
Competitive landscape
- The company is facing increased competition in the pet food category.
- Management is focused on supporting core brand equities while scaling premium innovation to maintain market share.
Macroeconomic environment
- The cost environment remains elevated and volatile, particularly for oil-based commodities.
We expect the cost environment to continue through the fourth quarter and into the early part of next year.
- Tariffs are expected to peak in the fourth quarter, and foreign exchange movements have been unfavorable.
Growth opportunities and strategies
- The company is prioritizing premium innovation and scaling its AI capabilities, including PromoAI, to optimize promotional spend.
We plan to increase both the pace and impact of innovation with a pipeline focused on premium opportunities that can grow at scale.
- The Funding the Growth and SGPP programs are being used to drive productivity and simplify the organization.
The goal is not simply to manage through volatility, it's to emerge with a stronger business and an even more resilient business moving forward.
- The company is expanding its Fresh pet food line in a disciplined, methodical rollout.
Financial guidance and outlook
- Management did not provide 2027 financial guidance.
Since we're in '26, we won't be sharing guidance on '27 until the first quarter of next year.
- The company raised its full-year gross profit margin guidance, expecting expansion for the year.
- Commodity costs for the balance of 2026 are largely locked in and included in current guidance.
Cost management and productivity
- Material costs represented a 300 basis point headwind in the third quarter.
Material prices were roughly 300 basis points of a headwind in line with our expectations.
- Funding the Growth initiatives provided over 290 basis points of offset to material inflation.
- Logistics costs are expected to be at their highest level of the year in the fourth quarter.
AI and Technology
- The company is scaling AI capabilities globally for product ideation and promotional optimization.
We're scaling our AI capabilities globally with PromoAI now in many key markets.
- The China business is utilizing AI-generated content to personalize messaging and drive growth.
Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Free cash flow | Up 7% | Year-to-date |
| Capital returned to shareholders | $2.2 billion | Year-to-date |
| Emerging markets organic sales | Up mid-single digits | Not stated |
| Hill's organic sales (ex private label) | 6.5% | Not stated |
| Latin America organic sales | 6% | Not stated |
| Latin America volume growth | 3.9% | Not stated |
How management sounded
Balanced (+35 on our -100 to +100 scale). Management expressed optimism about their global model and ability to offset persistent cost headwinds through pricing and productivity, despite acknowledging specific challenges in Mexico. Management sounded more upbeat than on 20% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Read the analyst Q&A summary and guidance and outlook for this call.
What to watch before the next call
- The impact of elevated commodity and logistics costs on 2027 performance.
- The progress of the U.S. business turnaround and the impact of new premium innovation.
- The performance of the new Fresh product line rollout for Hill's.
- Economic and political volatility in emerging markets, specifically Mexico and Brazil.
Earlier calls
- Q2 2026 (Jul 31, 2026), tone Balanced: Colgate-Palmolive delivered strong top and bottom-line growth with an 18% increase in free cash flow, though management remains cautious about U.S. performance and global volatility.
