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Strong Segments to Aid Church & Dwight's (CHD) Q3 Earnings
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Church & Dwight Co., Inc. (CHD - Free Report) is slated to release third-quarter 2018 results on Nov 1. This provider of household, personal care and specialty products boasts a splendid surprise history, as it has topped earnings and sales estimates for seven and four straight quarters, respectively.
Let’s see what’s in store for the company this time around.
The Zacks Consensus Estimate currently stands at 54 cents, which has remained stable in the past 30 days and also compares favorably with 49 cents per share reported in the year-ago quarter. Further, the consensus mark for revenues stands at $1,022 million, reflecting 5.6% growth from the year-ago quarter’s figure.
Impressive Organic Sales Trend Bodes Well
Church & Dwight has been witnessing organic sales growth for quite some time now, backed by its focus on product innovations. Evidently, organic sales grew 4.4% in the second quarter of 2018, following a 3.8% rise in the first quarter. In the second quarter of 2018, organic sales growth came ahead of the company’s guidance of 3% and was driven by a 5.3% rise in global consumer products growth. Well, organic sales rose 5% and 6.8% in the Consumer Domestic and Consumer International segments, respectively. Organic sales are now anticipated to rise 3.5% in 2018, which gives out positive signals for the quarter to be reported.
Talking of segments, Church & Dwight’s Consumer International business has been consistently contributing to organic sales growth of the company. In second-quarter 2018, Consumer International sales remained strong, surging 21.4%, backed by recent acquisitions, broad-based sales growth for household and personal care products, and improvements in export business. Further, organic sales were backed by higher volumes, which received considerable impetus from OXICLEAN, BATISTE, and ARM & HAMMER liquid laundry detergent in the export business, ARM & HAMMER liquid laundry detergent and clumping cat litter, BATISTE in Canada, and OXICLEAN Ultra Gel and NAIR in Mexico. Well, ARM & HAMMER is the company’s biggest international brand, which is well positioned to grow further in the emerging markets.
Church & Dwight is also opening new offices to support increase in export business and expects this business to remain strong. As the international market is a bright spot for the company, it continues to invest in the Consumer International business to sustain strong sales growth. Notably, the Zacks Consensus Estimate for sales at this segment is pegged at $176 million compared with $163 million reported in the year-ago quarter. The consensus mark for Consumer Domestic sales stands at $771 million, up from $729 million recorded in the same period last year.
Hurdles in Church & Dwight’s Way
Unlike the aforementioned segments, Church & Dwight has been posting soft organic sales at its Specialty Products unit for two quarters now, owing to weak volumes. In second-quarter 2018, organic sales at this unit slipped 5.1%, resulting from a 6.7% decline in volumes. This was accountable to reduced demand for animal productivity products from Church & Dwight’s dairy customers, which, in turn, was a result of low milk prices in the dairy industry. These factors have also compelled Church & Dwight to reduce its dependence on the dairy space and increase focus on other businesses like poultry. The consensus estimate for sales at this segment is $75 million, reflecting a decline from $76 million posted in the year-ago quarter.
Apart from this, Church & Dwight’s gross margin has been declining year over year for a while now. In second-quarter 2018, it contracted 140 basis points (bps) to 44.3% due to increased commodity and transportation expenses. Gross margin was also hurt to the tune of about 70 bps, owing to impacts from a voluntary recall and an FDA authorized withdrawal related to various oral care products. The company expects hurdles related to the oral care products and increased logistic expenses to dent gross margin in 2018.
Buyouts & Brand Strength to Drive Results
Nevertheless, Church & Dwight’s strong Consumer International and Consumer Domestic segments, and benefits from acquisitions should help the company offset these hurdles. With regard to buyouts, the company has acquired a number of premium high-margin brands over time. These businesses have been boosting the company’s revenues, which are expected to reach $4 billion in 2018. Incidentally, Church & Dwight’s acquisition of Waterpik (concluded in Aug 2017) contributed significantly to its sales in the second quarter. Also, management expects sales from Waterpik to increase high-single digits in 2018.
These factors along with 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 the company’s performance. All said, management expects solid volume growth and improved market share to drive 2018 results, making us optimistic about the company’s third-quarter performance.
What the Zacks Model Unveils
Our proven model shows that Church & Dwight is likely to beat bottom-line estimates this quarter. For this to happen, the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Church & Dwight has a Zacks Rank #2 and an Earnings ESP of +1.85%, which makes us reasonably confident of an earnings beat.
Other Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:
Ralph Lauren Corporation (RL - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +0.23%.
PVH Corp. (PVH - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Strong Segments to Aid Church & Dwight's (CHD) Q3 Earnings
Church & Dwight Co., Inc. (CHD - Free Report) is slated to release third-quarter 2018 results on Nov 1. This provider of household, personal care and specialty products boasts a splendid surprise history, as it has topped earnings and sales estimates for seven and four straight quarters, respectively.
Let’s see what’s in store for the company this time around.
Church & Dwight Co., Inc. Price and EPS Surprise
Church & Dwight Co., Inc. Price and EPS Surprise | Church & Dwight Co., Inc. Quote
What to Expect?
The Zacks Consensus Estimate currently stands at 54 cents, which has remained stable in the past 30 days and also compares favorably with 49 cents per share reported in the year-ago quarter. Further, the consensus mark for revenues stands at $1,022 million, reflecting 5.6% growth from the year-ago quarter’s figure.
Impressive Organic Sales Trend Bodes Well
Church & Dwight has been witnessing organic sales growth for quite some time now, backed by its focus on product innovations. Evidently, organic sales grew 4.4% in the second quarter of 2018, following a 3.8% rise in the first quarter. In the second quarter of 2018, organic sales growth came ahead of the company’s guidance of 3% and was driven by a 5.3% rise in global consumer products growth. Well, organic sales rose 5% and 6.8% in the Consumer Domestic and Consumer International segments, respectively. Organic sales are now anticipated to rise 3.5% in 2018, which gives out positive signals for the quarter to be reported.
Talking of segments, Church & Dwight’s Consumer International business has been consistently contributing to organic sales growth of the company. In second-quarter 2018, Consumer International sales remained strong, surging 21.4%, backed by recent acquisitions, broad-based sales growth for household and personal care products, and improvements in export business. Further, organic sales were backed by higher volumes, which received considerable impetus from OXICLEAN, BATISTE, and ARM & HAMMER liquid laundry detergent in the export business, ARM & HAMMER liquid laundry detergent and clumping cat litter, BATISTE in Canada, and OXICLEAN Ultra Gel and NAIR in Mexico. Well, ARM & HAMMER is the company’s biggest international brand, which is well positioned to grow further in the emerging markets.
Church & Dwight is also opening new offices to support increase in export business and expects this business to remain strong. As the international market is a bright spot for the company, it continues to invest in the Consumer International business to sustain strong sales growth. Notably, the Zacks Consensus Estimate for sales at this segment is pegged at $176 million compared with $163 million reported in the year-ago quarter. The consensus mark for Consumer Domestic sales stands at $771 million, up from $729 million recorded in the same period last year.
Hurdles in Church & Dwight’s Way
Unlike the aforementioned segments, Church & Dwight has been posting soft organic sales at its Specialty Products unit for two quarters now, owing to weak volumes. In second-quarter 2018, organic sales at this unit slipped 5.1%, resulting from a 6.7% decline in volumes. This was accountable to reduced demand for animal productivity products from Church & Dwight’s dairy customers, which, in turn, was a result of low milk prices in the dairy industry. These factors have also compelled Church & Dwight to reduce its dependence on the dairy space and increase focus on other businesses like poultry. The consensus estimate for sales at this segment is $75 million, reflecting a decline from $76 million posted in the year-ago quarter.
Apart from this, Church & Dwight’s gross margin has been declining year over year for a while now. In second-quarter 2018, it contracted 140 basis points (bps) to 44.3% due to increased commodity and transportation expenses. Gross margin was also hurt to the tune of about 70 bps, owing to impacts from a voluntary recall and an FDA authorized withdrawal related to various oral care products. The company expects hurdles related to the oral care products and increased logistic expenses to dent gross margin in 2018.
Buyouts & Brand Strength to Drive Results
Nevertheless, Church & Dwight’s strong Consumer International and Consumer Domestic segments, and benefits from acquisitions should help the company offset these hurdles. With regard to buyouts, the company has acquired a number of premium high-margin brands over time. These businesses have been boosting the company’s revenues, which are expected to reach $4 billion in 2018. Incidentally, Church & Dwight’s acquisition of Waterpik (concluded in Aug 2017) contributed significantly to its sales in the second quarter. Also, management expects sales from Waterpik to increase high-single digits in 2018.
These factors along with 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 the company’s performance. All said, management expects solid volume growth and improved market share to drive 2018 results, making us optimistic about the company’s third-quarter performance.
What the Zacks Model Unveils
Our proven model shows that Church & Dwight is likely to beat bottom-line estimates this quarter. For this to happen, the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Church & Dwight has a Zacks Rank #2 and an Earnings ESP of +1.85%, which makes us reasonably confident of an earnings beat.
Other Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:
Lululemon Athletica Inc. (LULU - Free Report) , a Zacks #1 Ranked stock, has an Earnings ESP of +5.89%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ralph Lauren Corporation (RL - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +0.23%.
PVH Corp. (PVH - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>