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Can Church & Dwight's Consumer International Fuel Growth?
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Church & Dwight Co., Inc. (CHD - Free Report) has been gaining from its focus on product innovations and strategic acquisitions. While the company gained from broad-based growth in fourth-quarter 2017, its Consumer International business has been doing exceptionally well.
The company’s international consumer business has been contributing to organic sales growth for more than a year now. In fourth-quarter 2017, organic sales in the international segment jumped 5.8%, courtesy of higher volumes. Further, overall international sales surged 33.3%, receiving considerable impetus from STERIMAR and OXICLEAN in the export business; STERIMAR, ARM & HAMMER toothpaste and OXICLEAN in Mexico; and ARM & HAMMER cat litter and BATISTE in Canada. Well, ARM & HAMMER remains the company’s biggest international brand, which is well placed to grow further in emerging markets.
Notably, the international consumer business has been a growth driver over the past few years and exceeded expectations with 11.8%, 7.4% and 6.2% organic growth in the first, second and third-quarter 2017, respectively. In fact, the international business grew 8% in 2015, 10% in 2016 and 18.3% in 2017. The company is also opening new offices in order to support increase in export business and expects this business to remain strong.
Further, it is making considerable investments in Southeast Asia and China, which is likely to be a major catalyst in future. This is well evident from the company’s recent tie-up with DKSH, to make the latter Church & Dwight’s leading distributor in Southeast Asia. The company continues to invest in the international consumer business to sustain its strong sales growth.
Well, continued strength at this business, along with solid growth in Consumer Domestic and Specialty Products businesses, drove Church & Dwight’s results in the fourth quarter. Both top and bottom lines grew year over year and the latter came ahead of the Zacks Consensus Estimate. Notably, this marked the company’s fifth consecutive quarter of positive earnings surprise. Clearly, the company’s investment spending is paying off.
However, the company plans to increase spending to maintain marketing at nearly 12% of sales, in 2018. Also, the company expects SG&A expenses to increase, as a percentage of sales, owing to intangible amortization expenses, integration costs and higher levels of SG&A from recent acquisitions. Moreover, it expects gross margin to remain flat year over year in 2018, as it expects gains from productivity and volume/mix to be countered by higher commodity and transportation expenses.
Nevertheless, management remains impressed with the broad-based growth and expects gains from tax reforms to benefit the bottom line. Also, Church & Dwight’s stable portfolio of value and premium products, launch of new and innovative products, and aggressive productivity programs are expected to keep driving its performance. Well, the effective tax rate in 2018 is expected to be about 24-25% compared with 32% in 2017. Consequently, the company estimates earnings per share of $2.24-$2.28, reflecting 16-18% growth in 2018.
While this Zacks Rank #3 (Hold) stock has gained 1% in the past three months, it has fared better than the industry’s decline of 9%. We expect strength in Consumer International and organic sales to aid further growth at Church & Dwight.
Flowers Foods (FLO - Free Report) , with a long-term EPS growth rate of 6.1%, carries a Zacks Rank #2 (Buy).
Darling Ingredients (DAR - Free Report) , a Zacks #2 Ranked stock, has witnessed solid estimate revisions in the last 30 days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Can Church & Dwight's Consumer International Fuel Growth?
Church & Dwight Co., Inc. (CHD - Free Report) has been gaining from its focus on product innovations and strategic acquisitions. While the company gained from broad-based growth in fourth-quarter 2017, its Consumer International business has been doing exceptionally well.
The company’s international consumer business has been contributing to organic sales growth for more than a year now. In fourth-quarter 2017, organic sales in the international segment jumped 5.8%, courtesy of higher volumes. Further, overall international sales surged 33.3%, receiving considerable impetus from STERIMAR and OXICLEAN in the export business; STERIMAR, ARM & HAMMER toothpaste and OXICLEAN in Mexico; and ARM & HAMMER cat litter and BATISTE in Canada. Well, ARM & HAMMER remains the company’s biggest international brand, which is well placed to grow further in emerging markets.
Notably, the international consumer business has been a growth driver over the past few years and exceeded expectations with 11.8%, 7.4% and 6.2% organic growth in the first, second and third-quarter 2017, respectively. In fact, the international business grew 8% in 2015, 10% in 2016 and 18.3% in 2017. The company is also opening new offices in order to support increase in export business and expects this business to remain strong.
Further, it is making considerable investments in Southeast Asia and China, which is likely to be a major catalyst in future. This is well evident from the company’s recent tie-up with DKSH, to make the latter Church & Dwight’s leading distributor in Southeast Asia. The company continues to invest in the international consumer business to sustain its strong sales growth.
Well, continued strength at this business, along with solid growth in Consumer Domestic and Specialty Products businesses, drove Church & Dwight’s results in the fourth quarter. Both top and bottom lines grew year over year and the latter came ahead of the Zacks Consensus Estimate. Notably, this marked the company’s fifth consecutive quarter of positive earnings surprise. Clearly, the company’s investment spending is paying off.
However, the company plans to increase spending to maintain marketing at nearly 12% of sales, in 2018. Also, the company expects SG&A expenses to increase, as a percentage of sales, owing to intangible amortization expenses, integration costs and higher levels of SG&A from recent acquisitions. Moreover, it expects gross margin to remain flat year over year in 2018, as it expects gains from productivity and volume/mix to be countered by higher commodity and transportation expenses.
Nevertheless, management remains impressed with the broad-based growth and expects gains from tax reforms to benefit the bottom line. Also, Church & Dwight’s stable portfolio of value and premium products, launch of new and innovative products, and aggressive productivity programs are expected to keep driving its performance. Well, the effective tax rate in 2018 is expected to be about 24-25% compared with 32% in 2017. Consequently, the company estimates earnings per share of $2.24-$2.28, reflecting 16-18% growth in 2018.
While this Zacks Rank #3 (Hold) stock has gained 1% in the past three months, it has fared better than the industry’s decline of 9%. We expect strength in Consumer International and organic sales to aid further growth at Church & Dwight.
Looking for More Promising Stocks? Check These
Post Holdings (POST - Free Report) , with a long-term earnings growth rate of 14%, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowers Foods (FLO - Free Report) , with a long-term EPS growth rate of 6.1%, carries a Zacks Rank #2 (Buy).
Darling Ingredients (DAR - Free Report) , a Zacks #2 Ranked stock, has witnessed solid estimate revisions in the last 30 days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>