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3 Reasons Why Church & Dwight (CHD) Is a Hot Investment Pick
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Church & Dwight Co., Inc. (CHD - Free Report) appears to be a solid bet, given its sturdy efforts to remain on growth trajectory. Notably, the company is gaining on its strong organic sales trend, and focus on international business and portfolio expansion. Its focus on product innovations and buyouts also bodes well.
In the past one year, shares of this Ewing, NJ-based company have increased approximately 37% outperforming the industry’s growth of 27.5%. Let’s check out the three major factors driving the company’s performance.
Strong Consumer International Business
The company’s consumer international business has been consistently contributing to organic sales growth. In first-quarter 2019, organic sales for this segment increased 8.5% on volume growth of 10.2%. Impetus to organic sales was mainly provided by FEMFRESH, BATISTE, STERIMAR, and ARM & HAMMER liquid laundry detergent in the Global Markets Group business, ARM & HAMMER clumping cat litter and liquid laundry detergent in Canada, BATISTE in Germany, and WATERPIK in several countries. Notably, ARM & HAMMER remains the company’s biggest international brand, which is well placed to grow further in emerging markets.
Further, overall consumer international sales also remained strong, rising 3.3%, backed by broad-based sales growth for household and personal care products, and improvement in Global Markets Group business. As international arena remains a bright spot for the company, it continues to invest in this segment to sustain its strong sales growth.
Acquisitions Aid Top Line
Church & Dwight has acquired a number of premium high-margin brands, which have been contributing significantly to top-line growth. To this end, the company recently concluded the buyout of FLAWLESS and FINISHING TOUCH (”FLAWLESS”), which will be a significant inclusion to its specialty haircare category.
Markedly, this is expected to contribute to the company’s top line in 2019. Some of the other noteworthy acquisitions of Church & Dwight include Waterpik (in August 2017), Agro BioSciences (in May 2017) and VIVISCAL business (in January 2017).
Impressive Brand Portfolio
Church & Dwight develops, manufactures and markets a broad range of household, personal care and specialty products. It is the leading U.S. producer of sodium bicarbonate, popularly known as baking soda. The company, which was started with just one brand, is now diversified with dozens of brands. It boasts power brands, including ARM & HAMMER, Trojan, OxiClean, Spinbrush, First Response, Nair, Orajel, Xtra, VMS, Water Pik and Batiste, which represents majority of its consumer sales.
Notably, it looks forward to having 20 power brands in its portfolio over time. The company’s regular innovation helps in improving brand position and market share in the consumer categories. In particular, management believes that innovation remains the biggest driver for its top- and bottom-line growth in future.
Wrapping Up
Church & Dwight’s top line has been impressive for a while. With first-quarter 2019 results, the company marked its seventh consecutive quarter of sales surprise. Sales in the quarter benefited from continued category growth and market share gains. Also, it has been witnessing organic sales growth, backed by its solid focus on product innovations. Organic sales grew 4.5% in the first quarter of 2019. For 2019, the company anticipates sales growth of 5-6% and organic sales to rise 3.5%. For the second quarter of 2019, management anticipates sales growth of approximately 4% on a reported basis, and 3.5% on an organic basis.
The company is on track with its efficient pricing initiatives, which are expected to enhance gross margin amid rising costs. In the first quarter of 2019, gross margin expanded 20 basis points on account of favorable pricing and volumes, and gains from productivity programs. In 2019, gross margin is likely to increase 50 bps compared with 10-bps growth expected earlier. This is likely to be supported by gains from pricing, product mix and productivity programs to the tune of about 30 bps, and contributions from FLAWLESS of nearly 20 bps.
We expect all aforementioned factors to continue bolstering this Zacks Rank #2 (Buy) stock, and help it remain in investors’ good books.
McCormick & Company, Incorporated (MKC - Free Report) has a long-term earnings growth rate of 8% and a Zacks Rank #2.
General Mills, Inc. (GIS - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.
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3 Reasons Why Church & Dwight (CHD) Is a Hot Investment Pick
Church & Dwight Co., Inc. (CHD - Free Report) appears to be a solid bet, given its sturdy efforts to remain on growth trajectory. Notably, the company is gaining on its strong organic sales trend, and focus on international business and portfolio expansion. Its focus on product innovations and buyouts also bodes well.
In the past one year, shares of this Ewing, NJ-based company have increased approximately 37% outperforming the industry’s growth of 27.5%. Let’s check out the three major factors driving the company’s performance.
Strong Consumer International Business
The company’s consumer international business has been consistently contributing to organic sales growth. In first-quarter 2019, organic sales for this segment increased 8.5% on volume growth of 10.2%. Impetus to organic sales was mainly provided by FEMFRESH, BATISTE, STERIMAR, and ARM & HAMMER liquid laundry detergent in the Global Markets Group business, ARM & HAMMER clumping cat litter and liquid laundry detergent in Canada, BATISTE in Germany, and WATERPIK in several countries. Notably, ARM & HAMMER remains the company’s biggest international brand, which is well placed to grow further in emerging markets.
Further, overall consumer international sales also remained strong, rising 3.3%, backed by broad-based sales growth for household and personal care products, and improvement in Global Markets Group business. As international arena remains a bright spot for the company, it continues to invest in this segment to sustain its strong sales growth.
Acquisitions Aid Top Line
Church & Dwight has acquired a number of premium high-margin brands, which have been contributing significantly to top-line growth. To this end, the company recently concluded the buyout of FLAWLESS and FINISHING TOUCH (”FLAWLESS”), which will be a significant inclusion to its specialty haircare category.
Markedly, this is expected to contribute to the company’s top line in 2019. Some of the other noteworthy acquisitions of Church & Dwight include Waterpik (in August 2017), Agro BioSciences (in May 2017) and VIVISCAL business (in January 2017).
Impressive Brand Portfolio
Church & Dwight develops, manufactures and markets a broad range of household, personal care and specialty products. It is the leading U.S. producer of sodium bicarbonate, popularly known as baking soda. The company, which was started with just one brand, is now diversified with dozens of brands. It boasts power brands, including ARM & HAMMER, Trojan, OxiClean, Spinbrush, First Response, Nair, Orajel, Xtra, VMS, Water Pik and Batiste, which represents majority of its consumer sales.
Notably, it looks forward to having 20 power brands in its portfolio over time. The company’s regular innovation helps in improving brand position and market share in the consumer categories. In particular, management believes that innovation remains the biggest driver for its top- and bottom-line growth in future.
Wrapping Up
Church & Dwight’s top line has been impressive for a while. With first-quarter 2019 results, the company marked its seventh consecutive quarter of sales surprise. Sales in the quarter benefited from continued category growth and market share gains. Also, it has been witnessing organic sales growth, backed by its solid focus on product innovations. Organic sales grew 4.5% in the first quarter of 2019. For 2019, the company anticipates sales growth of 5-6% and organic sales to rise 3.5%. For the second quarter of 2019, management anticipates sales growth of approximately 4% on a reported basis, and 3.5% on an organic basis.
The company is on track with its efficient pricing initiatives, which are expected to enhance gross margin amid rising costs. In the first quarter of 2019, gross margin expanded 20 basis points on account of favorable pricing and volumes, and gains from productivity programs. In 2019, gross margin is likely to increase 50 bps compared with 10-bps growth expected earlier. This is likely to be supported by gains from pricing, product mix and productivity programs to the tune of about 30 bps, and contributions from FLAWLESS of nearly 20 bps.
We expect all aforementioned factors to continue bolstering this Zacks Rank #2 (Buy) stock, and help it remain in investors’ good books.
Key Picks
The Procter & Gamble Company (PG - Free Report) has a long-term earnings growth rate of 6.9% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
McCormick & Company, Incorporated (MKC - Free Report) has a long-term earnings growth rate of 8% and a Zacks Rank #2.
General Mills, Inc. (GIS - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
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