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3 Reasons Why Church & Dwight (CHD) is Up 17% in 3 Months

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Church & Dwight Co., Inc. (CHD - Free Report) is gaining momentum on the back of its robust international business along with focus on acquisitions and innovations. All these factors helped this soap and cleaning material company to retain its positive surprise record in third-quarter 2018, wherein both the top and bottom line grew year over year and topped the Zacks Consensus Estimate. Notably, this marked the company’s eighth and fifth consecutive quarter of positive earnings and sales surprise, respectively. Encouragingly, management raised organic sales view for 2018. (Read: Church & Dwight Q3 Earnings Top Estimates, Sales Up Y/Y)

In the past three months, this Zacks Rank #2 (Buy) stock has rallied roughly 17%, outperforming its industry’s 2.4% growth.



International Business: A Key Catalyst

Church & Dwight’s consumer international business has been consistently contributing to organic sales growth. In third-quarter 2018, organic sales in the international segment jumped 8.3%, courtesy of higher volumes. Results received considerable impetus from BATISTE, FEMFRESH in the export business, and VITAFUSION. In Canada, organic growth was mainly witnessed in VITAFUSION, BATISTE, and ARM & HAMMER clumping cat litter. Mexico witnessed robust growth in ARM & HAMMER liquid laundry detergent, baking soda, and dental care. Notably, ARM & HAMMER remains the company’s biggest international brand, which is well positioned to grow further in emerging markets.

Consumer international segment’s overall sales also remained strong, surging 6.9% backed by recent acquisitions, broad-based sales growth for household and personal care products, and improvements in export business. Moreover, the company is opening new offices in order to support increase in export business and expects this business to remain strong. As international arena remains a bright spot for the company, it continues to invest in this segment to sustain its strong sales growth.

Buyouts Hold Potential

Church & Dwight has acquired a number of premium brands with high margins, which have been contributing significantly toward top-line growth. In this regard, the acquisition of Waterpik (in August 2017), Agro BioSciences (in May 2017) and VIVISCAL business (in January 2017) are worth mentioning. Prior to that, the acquisitions of ANUSOL and RECTINOL brands from Johnson & Johnson in December 2016 helped the company boost its business internationally.

Solid Organic Sales & Outlook

Impressively, the company has been witnessing organic sales growth for some time now. In the third quarter, organic sales grew 4.7% preceded by a 4.4% rise in the second quarter and a 3.8% growth in the first quarter. In 2018, the metric is anticipated to rise 4%, up from 3.5% registered earlier. For the fourth quarter, management expects net sales and organic sales to increase by 3% each. Earnings are envisioned to come in at 57 cents per share in the same quarter, mirroring a year-over-year rise of 10% on an adjusted basis.

We expect all aforementioned factors to continue driving the company’s performance in the forthcoming periods.

3 Stocks to Watch
 
The Chefs' Warehouse (CHEF - Free Report) delivered an average positive earnings surprise of 54.7% in the trailing four quarters. It has a long-term earnings growth rate of 19% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie's Bargain Outlet Holdings (OLLI - Free Report) delivered an average positive earnings surprise of 9% in the trailing four quarters. It has a long-term earnings growth rate of 25% and a Zacks Rank #2.

The Estée Lauder Companies (EL - Free Report) delivered an average positive earnings surprise of 9.9% in the trailing four quarters. It has a long-term earnings growth rate of 11.9% and a Zacks Rank of 2.

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