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Church & Dwight (CHD) Q1 Earnings Top Estimates, Increase Y/Y
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Church & Dwight Co., Inc. (CHD - Free Report) reported robust first-quarter 2023 results, wherein both the top and bottom lines exceeded the Zacks Consensus Estimate and increased year over year. Results were affected by strong consumer demand for many of its products.
Quarter in Detail
Church & Dwight posted adjusted earnings of 85 cents per share, beating the Zacks Consensus Estimate of 76 cents and our estimate of 75 cents. The top line inched up 2.4% from 83 cents reported in the year-ago quarter.
Net sales of $1,429.8 million advanced 10.2% year over year and beat the Zacks Consensus Estimate of $1,352 million and our estimate of $1,348.6 million. These results were driven by robust consumer demand and improved case fill.
Organic sales climbed 5.7% due to favorable pricing to the tune of 5.7%, partly negated by flat volume. The company’s U.S. portfolio saw consumption growth in 12 of 17 categories in the first quarter. Global online sales, as a percentage of total sales, increased to 16.3% in the first quarter.
The gross margin expanded 90 basis points (bps) to 43.5% due to improved pricing, productivity and the impact of the Hero acquisition partially offset by higher manufacturing costs. Marketing expenses increased by $20.4 million year over year to $122.3 million. As a percentage of sales, the figure inched up 70 bps to 8.6%. Adjusted SG&A expenses, as a percentage of sales, increased 90 bps to 14% due to a permanent change to the timing of annual equity grants.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Consumer Domestic: Net sales in the segment increased 12.2% to $1,116.9 million due to both household and personal care sales growth, partially offset by softness in the company’s discretionary business (such as WATERPIK and FLAWLESS).
Organic sales inched up 5.5% because of favorable pricing and product mix to the tune of 6.4%, partly hurt by a 0.9% decline in volumes. Consumption growth was backed by strength in the ARM & HAMMER liquid detergent, ARM & HAMMER cat litter, THERABREATH mouthwash and XTRA liquid detergent.
The company witnessed market share gains in 8 out of 14 power brands in the domestic business. It anticipates witnessing accelerated market share gains in 2023 due to increased marketing.
Consumer International: Net sales in the segment increased 7.5% to $230.6 million. Organic sales were up 11.6%, driven by favorable pricing and higher volumes to the tune of 4.8% and 6.8%, respectively. The solid performance at International subsidiaries was driven by BATISTE, Vitamins and FEMFRESH.
Specialty Products: Sales in the segment dipped 5.9% to $82.3 million. Organic sales fell 5.9% due to lower volume in the dairy business as low-priced imports returned to the U.S. market.
Other Updates
CHD ended the quarter with cash on hand of $202.8 million and total debt of $2.4 billion. As of Mar 31, 2023, cash from operating activities was $273.1 million. Capital expenditures amounted to $25 million in the quarter under review.
The company expects about $250 million in capital expenditures for 2023. For 2023, Church & Dwight raised its expectation of cash flow from operations by $25 million to $950 million.
Guidance
Church & Dwight expects sales and earnings momentum from first-quarter to continue throughout 2023, driven by strong demand for its products. Accordingly, the company is raising the full-year outlook for sales, EPS, gross margin and cash flow.
For 2023, management expects reported sales growth of nearly 6-7%, up from previous guidance of 5-7%. The company anticipates organic sales growth of roughly 3-4%, up from the previously guided range of 2-4%. This outlook reflects strong operating fundamentals as operating profit is expected to increase 6-8% compared with previous guidance of 2-4%.
Church & Dwight expects the 2023 reported gross margin to expand 120 bps as it envisions inflation to be outpaced by pricing and productivity. The metric is expected to benefit from pricing, pack size changes, laundry concentration and the full-year impact of the higher-margin HERO business.
CHD anticipates year-over-year adjusted EPS growth of 2-4%, up from the previous outlook of 0-4% in 2023. This reflects organic growth, gross margin increase, marketing investments and growth in the operating income.
Management expects to raise marketing as a percentage of sales to about 10.5% in 2023 (from 10% in 2022) to sustain the current consumption momentum. It also expects SG&A both in dollars and as a percent of net sales to increase from 2022 as the company’s incentive compensation plan returns to normal levels in 2023. Other expense for 2023 is expected to be approximately $110 million, reflecting an increase in interest expense due to higher rates as well as debt related to the recent acquisition of HERO. These are likely to impact the adjusted EPS.
Q2 View
For the second quarter of 2023, Church & Dwight expects a roughly 7% increase in reported sales. Organic sales are estimated to rise nearly 3%. Management expects to witness gross margin expansion in the quarter, alongside expecting greater marketing and SG&A spending.
The company expects adjusted EPS of 78 cents, up 2.6% compared with the year-ago quarter’s adjusted EPS.
Shares of this Zacks Rank #3 (Hold) company have rallied 14.2% in the past three months compared with the industry’s 9.2% growth. We also note that shares of CHD have jumped more than 2.8% before the trading session on Apr 27 owing to its robust results.
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 15.3% and 7.3%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
Kimberly-Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 5.1%, on average.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial year sales and earnings suggests growth of 1.3% and 5.5%, respectively, from the year-ago reported numbers.
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Church & Dwight (CHD) Q1 Earnings Top Estimates, Increase Y/Y
Church & Dwight Co., Inc. (CHD - Free Report) reported robust first-quarter 2023 results, wherein both the top and bottom lines exceeded the Zacks Consensus Estimate and increased year over year. Results were affected by strong consumer demand for many of its products.
Quarter in Detail
Church & Dwight posted adjusted earnings of 85 cents per share, beating the Zacks Consensus Estimate of 76 cents and our estimate of 75 cents. The top line inched up 2.4% from 83 cents reported in the year-ago quarter.
Net sales of $1,429.8 million advanced 10.2% year over year and beat the Zacks Consensus Estimate of $1,352 million and our estimate of $1,348.6 million. These results were driven by robust consumer demand and improved case fill.
Organic sales climbed 5.7% due to favorable pricing to the tune of 5.7%, partly negated by flat volume. The company’s U.S. portfolio saw consumption growth in 12 of 17 categories in the first quarter. Global online sales, as a percentage of total sales, increased to 16.3% in the first quarter.
The gross margin expanded 90 basis points (bps) to 43.5% due to improved pricing, productivity and the impact of the Hero acquisition partially offset by higher manufacturing costs. Marketing expenses increased by $20.4 million year over year to $122.3 million. As a percentage of sales, the figure inched up 70 bps to 8.6%. Adjusted SG&A expenses, as a percentage of sales, increased 90 bps to 14% due to a permanent change to the timing of annual equity grants.
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 12.2% to $1,116.9 million due to both household and personal care sales growth, partially offset by softness in the company’s discretionary business (such as WATERPIK and FLAWLESS).
Organic sales inched up 5.5% because of favorable pricing and product mix to the tune of 6.4%, partly hurt by a 0.9% decline in volumes. Consumption growth was backed by strength in the ARM & HAMMER liquid detergent, ARM & HAMMER cat litter, THERABREATH mouthwash and XTRA liquid detergent.
The company witnessed market share gains in 8 out of 14 power brands in the domestic business. It anticipates witnessing accelerated market share gains in 2023 due to increased marketing.
Consumer International: Net sales in the segment increased 7.5% to $230.6 million. Organic sales were up 11.6%, driven by favorable pricing and higher volumes to the tune of 4.8% and 6.8%, respectively. The solid performance at International subsidiaries was driven by BATISTE, Vitamins and FEMFRESH.
Specialty Products: Sales in the segment dipped 5.9% to $82.3 million. Organic sales fell 5.9% due to lower volume in the dairy business as low-priced imports returned to the U.S. market.
Other Updates
CHD ended the quarter with cash on hand of $202.8 million and total debt of $2.4 billion. As of Mar 31, 2023, cash from operating activities was $273.1 million. Capital expenditures amounted to $25 million in the quarter under review.
The company expects about $250 million in capital expenditures for 2023. For 2023, Church & Dwight raised its expectation of cash flow from operations by $25 million to $950 million.
Guidance
Church & Dwight expects sales and earnings momentum from first-quarter to continue throughout 2023, driven by strong demand for its products. Accordingly, the company is raising the full-year outlook for sales, EPS, gross margin and cash flow.
For 2023, management expects reported sales growth of nearly 6-7%, up from previous guidance of 5-7%. The company anticipates organic sales growth of roughly 3-4%, up from the previously guided range of 2-4%. This outlook reflects strong operating fundamentals as operating profit is expected to increase 6-8% compared with previous guidance of 2-4%.
Church & Dwight expects the 2023 reported gross margin to expand 120 bps as it envisions inflation to be outpaced by pricing and productivity. The metric is expected to benefit from pricing, pack size changes, laundry concentration and the full-year impact of the higher-margin HERO business.
CHD anticipates year-over-year adjusted EPS growth of 2-4%, up from the previous outlook of 0-4% in 2023. This reflects organic growth, gross margin increase, marketing investments and growth in the operating income.
Management expects to raise marketing as a percentage of sales to about 10.5% in 2023 (from 10% in 2022) to sustain the current consumption momentum. It also expects SG&A both in dollars and as a percent of net sales to increase from 2022 as the company’s incentive compensation plan returns to normal levels in 2023. Other expense for 2023 is expected to be approximately $110 million, reflecting an increase in interest expense due to higher rates as well as debt related to the recent acquisition of HERO. These are likely to impact the adjusted EPS.
Q2 View
For the second quarter of 2023, Church & Dwight expects a roughly 7% increase in reported sales. Organic sales are estimated to rise nearly 3%. Management expects to witness gross margin expansion in the quarter, alongside expecting greater marketing and SG&A spending.
The company expects adjusted EPS of 78 cents, up 2.6% compared with the year-ago quarter’s adjusted EPS.
Shares of this Zacks Rank #3 (Hold) company have rallied 14.2% in the past three months compared with the industry’s 9.2% growth. We also note that shares of CHD have jumped more than 2.8% before the trading session on Apr 27 owing to its robust results.
3 Key Picks
Some top-ranked stocks are Inter Parfums (IPAR - Free Report) , General Mills (GIS - Free Report) and Kimberly-Clark Corporation (KMB - Free Report) .
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 15.3% and 7.3%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
Kimberly-Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 5.1%, on average.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial year sales and earnings suggests growth of 1.3% and 5.5%, respectively, from the year-ago reported numbers.