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Church & Dwight Co. Inc.’s (CHD - Snapshot Report) second-quarter 2013 earnings of 61 cents a share came a penny ahead of the Zacks Consensus Estimate (1.7% positive surprise)  and increased 8.9% from 56 cents earned in the prior-year quarter.

Other major consumer products companies like The Procter & Gamble Company (PG - Analyst Report) and The Clorox Company (CLX - Analyst Report) posted a positive earnings surprise of 2.6% and 3%, respectively. However, Colgate-Palmolive Co. (CL - Analyst Report) posted in line bottom-line results.

The top line for Church & Dwight improved 13.1% to $787.6 million but missed the Zacks Consensus Estimate of $791 million. Organic sales increased 1.8%, reflecting 2.7% growth in volume, partially offset by a negative impact of 0.9% due to pricing and adverse product mix. However, organic sales at the company’s global domestic and international consumer businesses increased 3.2%.

Gross profit increased 15.8% to $351 million compared with $303 million in the prior-year quarter. Moreover, gross margin expanded 110 basis points to 44.6%, reflecting operating efficiencies and flat commodity costs.

Operating income escalated 14.8% year over year to 140.5 million during the quarter. Moreover, operating margin expanded approximately 30 basis points to 17.8%.

Segment Details

Consumer Domestic's net sales elevated 17.4% year over year to $594.5 million, driven by a 50% jump in personal care products revenue to $240.5 million coupled with a 2.3% growth in household products revenue to $354 million.

Organic sales rose 2.5% during the quarter, reflecting higher sales of ARM & HAMMER liquid laundry detergents, TROJAN products, FIRST RESPONSE diagnostic kits and OXICLEAN laundry additives. This was, however, partially offset by sluggish sales of XTRA liquid laundry detergent, NAIR depilatories and ARM & HAMMER powdered laundry detergent.

Increase in sales represents a 4.6% improvement in volume, while product mix and pricing unfavorably impacted sales by 2.1%.

Consumer International's sales increased 9.4% year over year to $132.7 million. Organic sales increased 6.3%, attributable to healthy sales in Australia, UK and Canada. The sales rise reflected 2.8% growth in volume, while favorable product mix and pricing boosted sales by 3.5%.

Specialty Products' sales decreased 12% to $60.4 million, while organic sales declined 11.2% during the quarter. Sales were negatively impacted by adverse weather conditions. Volume led to a 10.9% decrease in sales, while unfavorable product mix and pricing led to a 0.3% decrease.

Other Financial Details

Church & Dwight ended the quarter with cash and cash equivalents of $274.1 million, long-term debt of $649.5 million and shareholders’ equity of $2,146.7 million. Moreover, for the first half of 2013, it generated operating cash flow of $161 million and incurred $20.1 million in capital expenditures.

Outlook

Management stood by its earlier guidance and expects innovative product launches and cost cutting endeavors to continue boost to bottom-line results. The company anticipates earnings per share to be $2.79 for 2013, up 14% year over year.

Church & Dwight forecasts net sales to rise at an almost double-digit rate, while organic sales are expected to rise approximately 2% in 2013. Owing to its operating efficiencies, the company now expects gross margin to expand by 50 to 75 basis points compared to the prior year, up from its earlier guidance range of 25 –50 basis points.

For the third quarter, Church & Dwight expects net sales to witness an increase of 11% to 12% with an organic sales growth of 1% to 2%. Earnings per share is expected to be 73 cents, up 10.6% year over year.

Currently, Church & Dwight holds a Zacks Rank #2 (Buy).

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