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Church & Dwight's (CHD) Q1 Earnings & Sales Beat Estimates
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Church & Dwight Co., Inc. (CHD - Free Report) reported better-than-expected first-quarter 2020 results, wherein both top and bottom lines improved year over year. Results gained from increased hoarding of essentials by consumers in March. To this end, the company witnessed a 30% rise in the consumption of all brands stemming from a sudden hike in demand. Also, it is struggling to restock inventories and store shelves with higher retailer orders and shipments in April.
Further, impressive growth in most of its categories contributed to quarterly results. In this regard, both household and personal care businesses performed well, with consumers’ shifting preference for essential products. Moreover, the specialty products division recorded its second successive quarter of organic sales growth backed by an improvement in the dairy industry.
Despite solid first-quarter results, management withdrew its 2020 guidance, given the unprecedented impacts of COVID-19 on consumer demand, global economy, supply-chain operations, foreign-currency translation, commodity expenses and government restrictions.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight posted adjusted earnings of 83 cents per share that surpassed the Zacks Consensus Estimate of 76 cents and improved 13.7% from the year-ago quarter’s level. The bottom line includes a positive impact of 8 cents related to the buyout of FLAWLESS and 1 cent associated with gains from the sale of the PERL WEISS toothpaste brand.
Net sales of $1,165.2 million advanced 11.5% year over year. Moreover, the top line exceeded the Zacks Consensus Estimate of $1,127 million. Results were backed by solid demand for essential products, such as VITAFUSION gummy vitamins, ARM & HAMMER SIMPLY SALINE and STERIMAR nasal hygiene products, ARM & HAMMER baking soda, ARM & HAMMER and XTRA laundry detergent, ARM & HAMMER cat litter, and KABOOM bathroom cleaner, stemming from the COVID-19 situation in March.
Organic sales rose 9.2% and surpassed management’s roughly 3% growth projection. The uptick was fueled by a positive product mix and pricing, and a rise in volumes to the tune of 2.3% and 6.9%, respectively.
Gross margin expanded 60 basis points (bps) to 45.7% on solid efforts, including pricing and productivity, which was somewhat offset by increased manufacturing expenses, costs related to COVID-19 and currency headwinds.
Also, marketing expenses fell 1.7% to $96.4 million. As a percentage of sales, it contracted 10 bps to 8.3%. Adjusted SG&A expenses increased 14.5% to $151 million. As a percentage of sales, adjusted SG&A expenses increased 40 bps to 13%.
Adjusted income from operations, as a percentage of sales, rose 40 bps to 27%.
Segment Details
Consumer Domestic: Net sales of the segment rose 13.5% to $891 million due to higher household and personal care sales along with gains from acquisitions. Organic sales improved 10.2%, driven by a positive impact of 2.8% from price and product mix as well as 7.4% from higher volumes. The primary growth drivers in the segment were ARM & HAMMER clumping cat litter and baking soda, ARM & HAMMER liquid laundry detergent, VITAFUSION and L’IL CRITTERS gummy vitamins, OXICLEAN stain fighters and BATISTE dry shampoo.
Consumer International: Net sales of the segment rose 6.4% to $198.6 million, backed by broad-based sales growth in household and personal care products as well as gains from acquisitions. Organic sales increased 7.1% on higher volumes of 4.9% as well as favorable price and product mix of 2.2%. Organic sales were mainly driven by BATISTE dry shampoo in Germany, ARM & HAMMER cat litter & liquid laundry detergent in Canada, FEMFRESH feminine hygiene portfolio in Australia, CURASH baby wipes and STERIMAR nasal spray in the U.K.
Specialty Products: Sales in the segment increased 3.4% to $75.6 million. Also, organic sales advanced 3.4% due to higher volumes of 6.7% and unfavorable pricing to the tune of 3.3%. Further, management stated that demand for dairy products declined due to sluggishness in the consumption of milk and cheese stemming from the ongoing COVID-19 situation. However, demand for poultry products remained strong.
Other Financial Updates
Church & Dwight ended the quarter with cash and cash equivalents of $890.9 million, long-term debt of $1,810.8 million and total shareholders’ equity of $2,817.8 million.
In the quarter under review, the company generated cash flow from operations of $236.5 million and incurred a capital expenditure of $16.8 million.
Apart from this, the company announced a quarterly dividend hike of 5.5% to 24 cents per share, which is to be paid out on Jun 1, 2020, to shareholders on record, as of May 15. This will mark the 477th successive quarterly dividend.
Looking Ahead
Management remains focused on providing a continued supply of essentials during the second quarter to meet consumer demand. It projects year-over-year 8% sales growth for the month of April across the United States, backed by increased demand for household products and vitamins. Further, consumption in April is expected to remain positive with the shipment trend likely to reduce in May or June. Going ahead, the company remains well positioned with its broad product portfolio, solid balance sheet and cost-containment actions to overcome this ongoing hurdle.
Other Developments
This Zacks Rank #2 (Buy) company recently launched ARM & HAMMER laundry detergent called CLEAN & SIMPLE, which is touted to be at par with its bestselling product, namely ARM & HAMMER with OXICLEAN. Further, its BATISTE brand, belonging to the personal care unit, has launched a line of waterless cleansing foam for normal, dry and curly hair. Apart from this, it introduced NU RAZOR by FLAWLESS, which is a waterless whole-body hair removal product for women. The company also noted that the WATERPIK WATER FOR WELLNESS showerheads product is due for launch in the second half of 2020.
Price Performance
In the past three months, shares of the company have lost 7.9% compared with the industry’s decline of 7.7%.
Conagra Brands (CAG - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.
Campbell Soup Company (CPB - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.
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Church & Dwight's (CHD) Q1 Earnings & Sales Beat Estimates
Church & Dwight Co., Inc. (CHD - Free Report) reported better-than-expected first-quarter 2020 results, wherein both top and bottom lines improved year over year. Results gained from increased hoarding of essentials by consumers in March. To this end, the company witnessed a 30% rise in the consumption of all brands stemming from a sudden hike in demand. Also, it is struggling to restock inventories and store shelves with higher retailer orders and shipments in April.
Further, impressive growth in most of its categories contributed to quarterly results. In this regard, both household and personal care businesses performed well, with consumers’ shifting preference for essential products. Moreover, the specialty products division recorded its second successive quarter of organic sales growth backed by an improvement in the dairy industry.
Despite solid first-quarter results, management withdrew its 2020 guidance, given the unprecedented impacts of COVID-19 on consumer demand, global economy, supply-chain operations, foreign-currency translation, commodity expenses and government restrictions.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight Co., Inc. price-consensus-eps-surprise-chart | Church & Dwight Co., Inc. Quote
Quarter in Detail
Church & Dwight posted adjusted earnings of 83 cents per share that surpassed the Zacks Consensus Estimate of 76 cents and improved 13.7% from the year-ago quarter’s level. The bottom line includes a positive impact of 8 cents related to the buyout of FLAWLESS and 1 cent associated with gains from the sale of the PERL WEISS toothpaste brand.
Net sales of $1,165.2 million advanced 11.5% year over year. Moreover, the top line exceeded the Zacks Consensus Estimate of $1,127 million. Results were backed by solid demand for essential products, such as VITAFUSION gummy vitamins, ARM & HAMMER SIMPLY SALINE and STERIMAR nasal hygiene products, ARM & HAMMER baking soda, ARM & HAMMER and XTRA laundry detergent, ARM & HAMMER cat litter, and KABOOM bathroom cleaner, stemming from the COVID-19 situation in March.
Organic sales rose 9.2% and surpassed management’s roughly 3% growth projection. The uptick was fueled by a positive product mix and pricing, and a rise in volumes to the tune of 2.3% and 6.9%, respectively.
Gross margin expanded 60 basis points (bps) to 45.7% on solid efforts, including pricing and productivity, which was somewhat offset by increased manufacturing expenses, costs related to COVID-19 and currency headwinds.
Also, marketing expenses fell 1.7% to $96.4 million. As a percentage of sales, it contracted 10 bps to 8.3%. Adjusted SG&A expenses increased 14.5% to $151 million. As a percentage of sales, adjusted SG&A expenses increased 40 bps to 13%.
Adjusted income from operations, as a percentage of sales, rose 40 bps to 27%.
Segment Details
Consumer Domestic: Net sales of the segment rose 13.5% to $891 million due to higher household and personal care sales along with gains from acquisitions. Organic sales improved 10.2%, driven by a positive impact of 2.8% from price and product mix as well as 7.4% from higher volumes. The primary growth drivers in the segment were ARM & HAMMER clumping cat litter and baking soda, ARM & HAMMER liquid laundry detergent, VITAFUSION and L’IL CRITTERS gummy vitamins, OXICLEAN stain fighters and BATISTE dry shampoo.
Consumer International: Net sales of the segment rose 6.4% to $198.6 million, backed by broad-based sales growth in household and personal care products as well as gains from acquisitions. Organic sales increased 7.1% on higher volumes of 4.9% as well as favorable price and product mix of 2.2%. Organic sales were mainly driven by BATISTE dry shampoo in Germany, ARM & HAMMER cat litter & liquid laundry detergent in Canada, FEMFRESH feminine hygiene portfolio in Australia, CURASH baby wipes and STERIMAR nasal spray in the U.K.
Specialty Products: Sales in the segment increased 3.4% to $75.6 million. Also, organic sales advanced 3.4% due to higher volumes of 6.7% and unfavorable pricing to the tune of 3.3%. Further, management stated that demand for dairy products declined due to sluggishness in the consumption of milk and cheese stemming from the ongoing COVID-19 situation. However, demand for poultry products remained strong.
Other Financial Updates
Church & Dwight ended the quarter with cash and cash equivalents of $890.9 million, long-term debt of $1,810.8 million and total shareholders’ equity of $2,817.8 million.
In the quarter under review, the company generated cash flow from operations of $236.5 million and incurred a capital expenditure of $16.8 million.
Apart from this, the company announced a quarterly dividend hike of 5.5% to 24 cents per share, which is to be paid out on Jun 1, 2020, to shareholders on record, as of May 15. This will mark the 477th successive quarterly dividend.
Looking Ahead
Management remains focused on providing a continued supply of essentials during the second quarter to meet consumer demand. It projects year-over-year 8% sales growth for the month of April across the United States, backed by increased demand for household products and vitamins. Further, consumption in April is expected to remain positive with the shipment trend likely to reduce in May or June. Going ahead, the company remains well positioned with its broad product portfolio, solid balance sheet and cost-containment actions to overcome this ongoing hurdle.
Other Developments
This Zacks Rank #2 (Buy) company recently launched ARM & HAMMER laundry detergent called CLEAN & SIMPLE, which is touted to be at par with its bestselling product, namely ARM & HAMMER with OXICLEAN. Further, its BATISTE brand, belonging to the personal care unit, has launched a line of waterless cleansing foam for normal, dry and curly hair. Apart from this, it introduced NU RAZOR by FLAWLESS, which is a waterless whole-body hair removal product for women. The company also noted that the WATERPIK WATER FOR WELLNESS showerheads product is due for launch in the second half of 2020.
Price Performance
In the past three months, shares of the company have lost 7.9% compared with the industry’s decline of 7.7%.
Check These Solid Consumer Staple Stocks
Kraft Heinz Company (KHC - Free Report) has a long-term earnings growth rate of 6% and a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conagra Brands (CAG - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.
Campbell Soup Company (CPB - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>