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Church & Dwight Earnings Miss, Up Y-o-Y

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Church & Dwight Co. Inc.’s (CHD - Free Report) fourth-quarter 2013 earnings per share of 65 cents fell short of the Zacks Consensus Estimate by a couple of cents. However, the reported figure was 14.0% higher than 57 cents earned in the prior-year quarter.

Not much movement was seen in the stock price of Church & Dwight following its fourth-quarter 2013 results. The stock rose 2.7% during the trading session and fell by almost equivalent percentage in the aftermarket trading hours.

For the full year, earnings came in at $2.79 per share, a penny short of the Zacks Consensus Estimate. However, it rose 13.9% year over year.

The top line for Church & Dwight improved 1.6% to $822.6 million and marginally beat the Zacks Consensus Estimate of $822 million. Organic sales increased 2.3% (above management’s forecasted range of 1.5%–2%), driven by 5.2% growth in volume, partially offset by an adverse impact of 2.9% due to pricing.

For 2013, the top line came in at $3,194.3 million, up 9.3% year over year but marginally missed the Zacks Consensus Estimate of $3195.0 million.

Gross profit increased 3.7% year over year to $371.7 million.  Moreover, gross margin expanded 90 basis points (bps) to 45.2%, attributed to productivity programs undertaken by management, partly offset by adverse price/mix. Notably, this was the sixth successive quarter of gross margin expansion.

Operating income rose 7.4% year over year to $144.6 million in the quarter. Moreover, operating margin expanded approximately 100 bps to 17.6%.

Segment Details

Consumer Domestic's
net sales rose 2.2% year over year to $622.7 million, driven by a 6.4% increase in personal care products revenues to $268.4 million, partly offset by a 0.8% decline in household products revenues to $354.3 million.

Organic sales nudged up 2.9% in the quarter, due to a rise in sales of VITAFUSION, ARM & HAMMER liquid laundry detergents, L’IL CRITTER vitamins, TROJAN lubricants and OXICLEAN laundry additives. This was, however, partially offset by sluggish sales of XTRA liquid laundry detergent, ARM & HAMMER cat litter, ARM & HAMMER powdered laundry detergent and SPINBRUSH battery-powered toothbrushes.

Increase in sales marked a 6.6% improvement in volume, while product mix and pricing unfavorably impacted sales by 3.7%.

Consumer International's sales remained flat year over year at $136.3 million. Organic sales increased 0.3%, attributable to healthy sales in Canada Mexico, and Brazil. Volume fell marginally by 0.7% whereas favorable product mix and pricing impacted sales by 1.0%.

Specialty Products' sales decreased 0.6% to $63.6 million, while organic sales grew 0.7% in the said quarter. Volume growth of 4.5%, attributable to the animal nutrition business, was partly offset by unfavorable product pricing that adversely impacted sales by 3.8%.

Other Financial Details

Church & Dwight, which competes with The Clorox Company (CLX - Free Report) , Colgate-Palmolive Co. (CL - Free Report) and Procter & Gamble Company’s (PG - Free Report) , ended the quarter with cash and cash equivalents of $496.9 million, long-term debt of $649.5 million and shareholders’ equity of $2,300.0 million. Moreover, for 2013, it generated cash from operations of $499.6 million and incurred $67.1 million in capital expenditures.

On Jan 29, 2013, the company announced an 11% hike in its quarterly dividend to 31 cents, payable on Mar 3, 2014 to stockholders of record at the close of business on Feb 18, 2014. This is the 18th year of a successive dividend hike. Over the last five years, company has increased its dividend by nearly 300%.

Also, the board of directors approved a new share repurchase program worth $500 million. The existing authorization was cancelled.


Management expects innovative product launches and cost-cutting endeavors to boost bottom-line results further. The company anticipates earnings per share to be $2.96 to $3.07 for 2014, up 6-10% year over year. The Zacks Consensus Estimate for first quarter and full year 2014 is pegged at 81 cents and $3.09, respectively.

Church & Dwight forecasts organic sales to rise approximately 3.0% to 4.0% in 2014, Further, it expects gross margin to remain flat year over year in 2014 as productivity gains are neutralized by considerable investments made for new products and intense price war in the laundry category.

The company noted that most of the earnings growth will be achieved in the second half of the year as the first half is likely to see a plethora of expenses related to product launches.  Therefore, for the first quarter, the company expects organic sales of 1%, a decline of 100 bps in gross margin and earnings per share of 72 cents after factoring in a 50% hike in slotting and doubling of the couponing investment.

At present, Church & Dwight holds a Zacks Rank #4 (Sell).

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