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Church & Dwight Co., Inc. (CHD - Free Report) reported third-quarter 2022 results, with the bottom line declining year over year but beating the Zacks Consensus Estimate. The top line increased and beat the consensus mark.
Quarter in Detail
Church & Dwight posted earnings of 76 cents per share, beating the Zacks Consensus Estimate of 65 cents. However, the metric declined 5% from the year-ago quarter’s adjusted earnings per share (EPS).The bottom line included currency headwinds of a cent in the third quarter of 2022. Management highlighted that quarterly EPS came ahead of its expectation courtesy of increased sales, reduced SG&A costs and a shift of marketing spend to the next quarter.
Net sales of $1,317.3 million inched up 0.4% year over year and beat the Zacks Consensus Estimate of $1,299.7 million. Net sales included a 1% impact from unfavorable currency rates. Organic sales fell 0.7%, owing to a volume decline of 8.5%. This was somewhat offset by favorable pricing to the tune of 7.8%. The company’s U.S. portfolio saw consumption growth in 11 of 17 categories.
The gross margin shrunk 250 basis points (bps) to 41.7%, thanks to increased raw material, manufacturing and distribution expenses. In addition, increased promotional spending was a concern for the metric.
Marketing expenses declined by $20.2 million year over year to $140.7 million. As a percentage of sales, the figure increased sequentially by 290 bps to 10.7%. SG&A expenses, as a percentage of sales, expanded 280 bps to 11.7%. On an adjusted basis SG&A contracted by 30 bps.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Consumer Domestic: Net sales in the segment increased 1.2% to $1,010.4 million owing to household product sales growth. Organic sales inched down 1.7% due to lower volume countered by favorable price and product mix. Reduced consumption of vitamins and softness in discretionary items like WATERPIK and FLAWLESS were a concern. These were somewhat offset by growth from OXICLEAN Versatile Stain Remover, ARM & HAMMER Liquid Detergent, BATISTE dry shampoo and ARM & HAMMER Cat Litter.
Consumer International: Net sales in the segment fell 3.2% to $219.7 million, including currency woes of 7%. Organic sales were up 3.2%, with a higher price and mix. Organic sales growth was mainly led by growth in the International subsidiaries.
Specialty Products: Sales in the segment advanced 1% to $87.2 million. Organic sales also grew 1% on favorable pricing in the dairy and Specialty Chemicals businesses.
Other Updates
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $437.6 million and total debt of $2.5 billion. In the first nine months of 2022, cash from operating activities was $534.1 million. Capital expenditure amounted to $98.1 million in the same period. The company expects $170 million of capital expenditures for 2022. For 2022, the company anticipates cash flow from operations of $800 million.
2022 View
Management continues to expect 2022 reported sales growth of nearly 3%, the midpoint of its previous range (2-4%). The company anticipates 2022 organic sales growth of roughly 1%. Management stated that solid consumption in several businesses during 2022 has offset the slowdown across discretionary brands, including Waterpik and Flawless and reduced consumption growth in the vitamin category.
Church & Dwight still expects the 2022 reported gross margin to contract year over year, as it envisions inflation to outpace pricing and productivity. That said, management is committed to offsetting inflation with additional pricing and productivity efforts during 2023. The company now anticipates adjusted EPS in the range of $2.93-$2.97, down 2-3% from adjusted EPS reported in 2021. Earlier, the company had expected an adjusted EPS of $2.97 in 2022.
Image Source: Zacks Investment Research
Q4 Outlook
For the fourth quarter of 2022, the company expects a roughly 2% increase in reported sales. Organic sales are estimated to fall nearly 1%. Management expects to witness gross margin contraction in the quarter due to an unfavorable mix within the portfolio. The company expects adjusted EPS in the band of 58-62 cents per share, down 3-9% compared with the year-ago quarter’s adjusted EPS. The downside can be attributed to a major rise in quarterly tax rate and acquisition-related costs.
In the past three months, CHD’s stock has dropped 13% compared with the industry’s decline of 6%.
TreeHouse Foods, which manufactures and distributes private-label foods and beverages, sports a Zacks Rank #1 (Strong Buy) at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for THS’ current financial-year sales and EPS suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently carries a Zacks Rank of 2 (Buy). LANC delivered an earnings surprise of 170% in the last reported quarter.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2. MED has a trailing four-quarter earnings surprise of 12.4%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales EPS suggests decline of 8.3% from the year-ago reported figures.
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Church & Dwight (CHD) Q3 Earnings Beat Mark, Sales Rise Y/Y
Church & Dwight Co., Inc. (CHD - Free Report) reported third-quarter 2022 results, with the bottom line declining year over year but beating the Zacks Consensus Estimate. The top line increased and beat the consensus mark.
Quarter in Detail
Church & Dwight posted earnings of 76 cents per share, beating the Zacks Consensus Estimate of 65 cents. However, the metric declined 5% from the year-ago quarter’s adjusted earnings per share (EPS).The bottom line included currency headwinds of a cent in the third quarter of 2022. Management highlighted that quarterly EPS came ahead of its expectation courtesy of increased sales, reduced SG&A costs and a shift of marketing spend to the next quarter.
Net sales of $1,317.3 million inched up 0.4% year over year and beat the Zacks Consensus Estimate of $1,299.7 million. Net sales included a 1% impact from unfavorable currency rates. Organic sales fell 0.7%, owing to a volume decline of 8.5%. This was somewhat offset by favorable pricing to the tune of 7.8%. The company’s U.S. portfolio saw consumption growth in 11 of 17 categories.
The gross margin shrunk 250 basis points (bps) to 41.7%, thanks to increased raw material, manufacturing and distribution expenses. In addition, increased promotional spending was a concern for the metric.
Marketing expenses declined by $20.2 million year over year to $140.7 million. As a percentage of sales, the figure increased sequentially by 290 bps to 10.7%. SG&A expenses, as a percentage of sales, expanded 280 bps to 11.7%. On an adjusted basis SG&A contracted by 30 bps.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight Co., Inc. price-consensus-eps-surprise-chart | Church & Dwight Co., Inc. Quote
Segmental Details
Consumer Domestic: Net sales in the segment increased 1.2% to $1,010.4 million owing to household product sales growth. Organic sales inched down 1.7% due to lower volume countered by favorable price and product mix. Reduced consumption of vitamins and softness in discretionary items like WATERPIK and FLAWLESS were a concern. These were somewhat offset by growth from OXICLEAN Versatile Stain Remover, ARM & HAMMER Liquid Detergent, BATISTE dry shampoo and ARM & HAMMER Cat Litter.
Consumer International: Net sales in the segment fell 3.2% to $219.7 million, including currency woes of 7%. Organic sales were up 3.2%, with a higher price and mix. Organic sales growth was mainly led by growth in the International subsidiaries.
Specialty Products: Sales in the segment advanced 1% to $87.2 million. Organic sales also grew 1% on favorable pricing in the dairy and Specialty Chemicals businesses.
Other Updates
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $437.6 million and total debt of $2.5 billion. In the first nine months of 2022, cash from operating activities was $534.1 million. Capital expenditure amounted to $98.1 million in the same period. The company expects $170 million of capital expenditures for 2022. For 2022, the company anticipates cash flow from operations of $800 million.
2022 View
Management continues to expect 2022 reported sales growth of nearly 3%, the midpoint of its previous range (2-4%). The company anticipates 2022 organic sales growth of roughly 1%. Management stated that solid consumption in several businesses during 2022 has offset the slowdown across discretionary brands, including Waterpik and Flawless and reduced consumption growth in the vitamin category.
Church & Dwight still expects the 2022 reported gross margin to contract year over year, as it envisions inflation to outpace pricing and productivity. That said, management is committed to offsetting inflation with additional pricing and productivity efforts during 2023. The company now anticipates adjusted EPS in the range of $2.93-$2.97, down 2-3% from adjusted EPS reported in 2021. Earlier, the company had expected an adjusted EPS of $2.97 in 2022.
Image Source: Zacks Investment Research
Q4 Outlook
For the fourth quarter of 2022, the company expects a roughly 2% increase in reported sales. Organic sales are estimated to fall nearly 1%. Management expects to witness gross margin contraction in the quarter due to an unfavorable mix within the portfolio. The company expects adjusted EPS in the band of 58-62 cents per share, down 3-9% compared with the year-ago quarter’s adjusted EPS. The downside can be attributed to a major rise in quarterly tax rate and acquisition-related costs.
In the past three months, CHD’s stock has dropped 13% compared with the industry’s decline of 6%.
Some Solid Food Bets
Some better-ranked stocks are TreeHouse Foods (THS - Free Report) , Lancaster Colony (LANC - Free Report) and Medifast (MED - Free Report) .
TreeHouse Foods, which manufactures and distributes private-label foods and beverages, sports a Zacks Rank #1 (Strong Buy) at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for THS’ current financial-year sales and EPS suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently carries a Zacks Rank of 2 (Buy). LANC delivered an earnings surprise of 170% in the last reported quarter.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2. MED has a trailing four-quarter earnings surprise of 12.4%, on average.
The Zacks Consensus Estimate for Medifast’s current financial year sales EPS suggests decline of 8.3% from the year-ago reported figures.