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Church & Dwight Co. Inc.’s (CHD - Snapshot Report) third-quarter 2013 earnings per share of 76 cents beat the Zacks Consensus Estimate (2.7% positive surprise)  by 2 cents. Moreover, the reported figure was 15.2% higher than 66 cents earned in the prior-year quarter.

Among other major consumer product companies, The Clorox Company (CLX - Analyst Report) posted a positive earnings surprise of 4.0%.  On the other hand, Colgate-Palmolive Co. (CL - Analyst Report) and Procter & Gamble Company’s (PG - Analyst Report) reported bottom-line results that were in line with the Zacks Consensus Estimate.

The top line for Church & Dwight improved 11.0% to $804.8 million due to robust performance of the acquired Avid gummy vitamin business. However, it missed the Zacks Consensus Estimate of $814 million. Organic sales increased 1.6% (within the expected range of 1%–2%), driven by 4.7% growth in volume, partially offset by a negative impact of 3.1% due to pricing and adverse product mix.

Gross profit increased 11.5% year over year to $365.2 million.  Moreover, gross margin expanded 20 basis points (bps) to 45.4%, based on operating efficiencies and flat commodity costs, partly offset by adverse price/mix. Notably, this was the fifth successive quarter of gross margin expansion.

Operating income rose 15.4% year over year to 167.8 million in the quarter. Moreover, operating margin expanded approximately 80 bps to 20.8%.

Segment Details

Consumer Domestic's net sales rose 14.1% year over year to $605.3 million, driven by a 39.0% increase in personal care products revenues to $236.3 million and 2.4% growth in household products revenues to $369.0 million.

Organic sales (excluding gummy vitamin business) nudged up 0.8% in the quarter, due to rise in 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 SPINBRUSH battery-powered toothbrushes, NAIR depilatories and ARM & HAMMER powdered laundry detergent and ARM & HAMMER cat litter.

Increase in sales marked a 4.5% improvement in volume, while product mix and pricing unfavorably impacted sales by 3.7%.

Consumer International's sales increased 2.6% year over year to $134.5 million. Organic sales increased 3.7%, attributable to healthy sales in Canada, France, Mexico, and the U.K.

Specialty Products' sales increased 2.0% to $65.0 million, while organic sales declined 3.7% in the said quarter. Increased volumes led to sales growth of 7.9% while unfavorable product mix and pricing led to a 4.2% decrease in sales.

Other Financial Details

Church & Dwight ended the quarter with cash and cash equivalents of $445.5 million, long-term debt of $649.5 million and shareholders’ equity of $2,230.7 million. Moreover, for the first nine months of 2013, it generated cash from operations of $376.6 million and incurred $30.0 million in capital expenditures.

On Oct 31, 2013, the company declared a dividend of 28 cents, payable on Dec 2, 2013 to stockholders of record at the close of business on Nov 11, 2013.

Outlook

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

Church & Dwight forecasts organic sales to rise approximately 1.5% to 2% in 2013. Owing to its operating efficiencies, the company now expects gross margin to expand by 75 bps as compared with the prior year.

For the fourth quarter, earnings per share are expected to be 65 cents, up 14.0% year over year.

For 2014, on the basis of product innovation and higher market spending, Church & Dwight expects organic growth of 3%–4%.

At present, Church & Dwight holds a Zacks Rank #3 (Hold).

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