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Will Strong Pricing Action Aid Church & Dwight's (CHD) Growth?
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Church & Dwight Co. Inc. (CHD - Free Report) has been benefiting from aggressive pricing actions and a solid online show for a while now. The company’s strong brand portfolio and strategic buyouts also bode well.
This led to robust first-quarter 2023 results, wherein the bottom line and top line beat the Zacks Consensus Estimate. Net sales of $1,429.8 million advanced 10.2% year over year. The company’s U.S. portfolio saw consumption growth in 12 out of 17 categories.
Management raised its guidance for 2023 owing to strong demand for its products. It expects reported sales growth of 6-7% in 2023. For the second quarter of 2023, management expects an approximately 7% increase in reported sales.
The company anticipates 2023 organic sales growth in the range of 3-4%. For the second quarter of 2023, organic sales growth is anticipated to be approximately 3%.
Let’s delve deeper into the factors aiding the stock.
Image Source: Zacks Investment Research
Strong Pricing Action: Key Factors
Church & Dwight has resorted to incremental pricing across its portfolio to counter rising costs. Favorable pricing has been an upside to the company’s organic sales for a while now. In the first quarter of 2023, organic sales increased 5.7%, owing to favorable pricing to the tune of 5.7%, partly negated by flat volume. Management stated that solid consumption in several businesses during first-quarter has offset the slowdown across discretionary brands, including Waterpik and Flawless.
Another factor working for Church & Dwight is the online channel. During the first quarter, the company’s online sales, as a percentage of total sales, came in at 16.3%. For 2023, management expects pricing and productivity to more than offset inflation.
What Else is Driving Growth
Church & Dwight’s impressive brand portfolio and innovation are aiding the company’s growth. CHD recently completed its buyout of the Hero Mighty Patch brand (HERO) and other acne treatment products. It also concluded the integration of the THERABREATH buyout, which marks the company's 14th power brand.
We note that CHD’s recent acquisitions, THERABREATH and HERO, experienced double-digit consumption growth and market share gains in the first quarter.
CHD also remains focused on product innovation for further growth. It is launching ARM & HAMMER Hardball to enable it to capture greater share of the lightweight litter category. Also, the TROJAN brand is building on the success of the Raw franchise by offering the new TROJAN Raw Non-Latex condom.
Another notable launch is THERABREATH’s three new fluoride mouthwashes. The company also announced the launch of MICROPOINT FOR BLEMISHES XL patches under the HERO brand owing to the success of its MIGHTY PATCH products. Apart from this, NAIR brand is also launching Prep & Smooth, a one-step solution that preps the face for makeup application in a No-Touch and No-Mess format.
Headwinds to Overcome
Church & Dwight has been witnessing increased marketing and selling, general and administrative (SG&A) expenses for the past few quarters.
For 2023, management intends to increase marketing expense as a percent of sales by 50 basis points from the year-ago period. It also expects SG&A expense, 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.
Wrapping Up
CHD’s strong brand portfolio, online strength, pricing actions and strategic buyouts are likely to offset the hurdles stemming from cost inflation in the near term. A long-term earnings growth rate of 7.9% raises optimism in the stock.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 13.2% compared with the industry's 9.7% growth.
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 37.2%, 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 15.2% 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.
e.l.f. Beauty operates as a cosmetic company. It currently has a Zacks Rank of 2. ELF has a trailing four-quarter earnings surprise of 105%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings suggests growth of 39.8% and 70.2%, respectively, from the year-ago reported numbers.
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Will Strong Pricing Action Aid Church & Dwight's (CHD) Growth?
Church & Dwight Co. Inc. (CHD - Free Report) has been benefiting from aggressive pricing actions and a solid online show for a while now. The company’s strong brand portfolio and strategic buyouts also bode well.
This led to robust first-quarter 2023 results, wherein the bottom line and top line beat the Zacks Consensus Estimate. Net sales of $1,429.8 million advanced 10.2% year over year. The company’s U.S. portfolio saw consumption growth in 12 out of 17 categories.
Management raised its guidance for 2023 owing to strong demand for its products. It expects reported sales growth of 6-7% in 2023. For the second quarter of 2023, management expects an approximately 7% increase in reported sales.
The company anticipates 2023 organic sales growth in the range of 3-4%. For the second quarter of 2023, organic sales growth is anticipated to be approximately 3%.
Let’s delve deeper into the factors aiding the stock.
Image Source: Zacks Investment Research
Strong Pricing Action: Key Factors
Church & Dwight has resorted to incremental pricing across its portfolio to counter rising costs. Favorable pricing has been an upside to the company’s organic sales for a while now. In the first quarter of 2023, organic sales increased 5.7%, owing to favorable pricing to the tune of 5.7%, partly negated by flat volume. Management stated that solid consumption in several businesses during first-quarter has offset the slowdown across discretionary brands, including Waterpik and Flawless.
Another factor working for Church & Dwight is the online channel. During the first quarter, the company’s online sales, as a percentage of total sales, came in at 16.3%. For 2023, management expects pricing and productivity to more than offset inflation.
What Else is Driving Growth
Church & Dwight’s impressive brand portfolio and innovation are aiding the company’s growth. CHD recently completed its buyout of the Hero Mighty Patch brand (HERO) and other acne treatment products. It also concluded the integration of the THERABREATH buyout, which marks the company's 14th power brand.
We note that CHD’s recent acquisitions, THERABREATH and HERO, experienced double-digit consumption growth and market share gains in the first quarter.
CHD also remains focused on product innovation for further growth. It is launching ARM & HAMMER Hardball to enable it to capture greater share of the lightweight litter category. Also, the TROJAN brand is building on the success of the Raw franchise by offering the new TROJAN Raw Non-Latex condom.
Another notable launch is THERABREATH’s three new fluoride mouthwashes. The company also announced the launch of MICROPOINT FOR BLEMISHES XL patches under the HERO brand owing to the success of its MIGHTY PATCH products. Apart from this, NAIR brand is also launching Prep & Smooth, a one-step solution that preps the face for makeup application in a No-Touch and No-Mess format.
Headwinds to Overcome
Church & Dwight has been witnessing increased marketing and selling, general and administrative (SG&A) expenses for the past few quarters.
For 2023, management intends to increase marketing expense as a percent of sales by 50 basis points from the year-ago period. It also expects SG&A expense, 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.
Wrapping Up
CHD’s strong brand portfolio, online strength, pricing actions and strategic buyouts are likely to offset the hurdles stemming from cost inflation in the near term. A long-term earnings growth rate of 7.9% raises optimism in the stock.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 13.2% compared with the industry's 9.7% growth.
Stocks to Consider
Some top-ranked stocks are Inter Parfums (IPAR - Free Report) , General Mills (GIS - Free Report) and e.l.f. Beauty (ELF - Free Report) .
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 37.2%, 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 15.2% 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.
e.l.f. Beauty operates as a cosmetic company. It currently has a Zacks Rank of 2. ELF has a trailing four-quarter earnings surprise of 105%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings suggests growth of 39.8% and 70.2%, respectively, from the year-ago reported numbers.