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Church & Dwight (CHD) Q4 Earnings Top Estimates, Sales Rise

·6 min read

Church & Dwight Co., Inc. CHD reported solid fourth-quarter 2021 results, with the top and the bottom line increasing year over year. The company’s earnings and net sales surpassed the Zacks Consensus Estimate.

Quarter in Detail

Church & Dwight posted adjusted earnings of 64 cents per share that topped the Zacks Consensus Estimate of 58 cents and increased 20.8% from the year-ago quarter’s level. This upside was mainly backed by greater-than-anticipated revenues from the company’s consumer domestic business. Also, the reduced tax rate was an upside. This was somewhat offset by increased marketing investments for the company’s brands along with higher incentive compensation.

Net sales of $1,368.7 million moved up 5.7% year over year and surpassed the Zacks Consensus Estimate of $1,348.8 million. Results were backed by solid consumption for the company’s brands. Organic sales rose 4.3%, with a favorable price and product mix of 6%. However, volumes declined 1.7%.The company saw consumption gains in 11 out of 16 domestic categories.

Church & Dwight Co., Inc. Price and EPS Surprise

Church & Dwight Co., Inc. Price and EPS Surprise
Church & Dwight Co., Inc. Price and EPS Surprise

Church & Dwight Co., Inc. price-eps-surprise | Church & Dwight Co., Inc. Quote

The gross margin shrunk 50 basis points (bps) to 42.5% due tothe adverse impact from increased manufacturing costs, net of pricing and productivity.

Marketing expenses remained unchanged year over year to $201.1 million. As a percentage of sales, the figure shrunk 90 bps to 14.7%. Adjusted SG&A expenses, as a percentage of sales, expanded 50 bps to 14.9%, thanks to acquisition costs, asset write-offs and increased compensation-related costs.

Segment Details

Consumer Domestic: Net sales in the segment increased 5.1% to $1,041.7 million, owing to higher household and personal care sales. Organic sales improved 3.6%, driven by a higher price and product mix, somewhat negated by reduced volumes. OXICLEAN stain fighter powder, ARM & HAMMER clumping cat litter, ARM & HAMMER liquid detergent, ARM & HAMMER scent boosters and BATISTE dry shampoo aided the segment.

Consumer International: Net sales in the segment increased 5.9% to $242 million, mainly on the back of the improvement of Global Markets Group. Organic sales were up 4.7%,with a volume rise of 4.2%. Organic sales growth was mainly driven by VITAFUSION, STERIMAR, FEMFRESH, NAIR and OXICLEAN in the Global Markets Group.

Specialty Products: Sales in the segment advanced 12% to $85 million. Organic sales mainly increased on favorable price and volume. Dairy and non-dairy sales increased in the quarter.

Other Updates

Church & Dwight reported cash on hand of $240.6 million and total debt of $2.56 billion as of Dec 31, 2021. For 2021, cash from operating activities came in at $993.8 million. Capital expenditures amounted to $118.8 million in 2021.

The company announced a 4% hike in its quarterly dividend from 25.25 cents to 26.25 per share. The revised quarterly dividend will be paid on Mar 1, 2022, to shareholders of record as of Feb 15, 2022. This marks the company’s 26th consecutive year of a dividend hike. At present, management has almost 242 million shares outstanding under its buyback plan.

2022 View

Church & Dwight is on track to undertake impressive product launches in 2022. In the Health and Wellbeing category, the VITAFUSION brand rolled out 2 in 1 BI-LAYER GUMMIES and an Ashwaganda gummy line. The ZICAM brand is rolling out the first immune supplement gummies with Zinc + Vitamins C&D. In the Specialty Haircare category, the BATISTE brand is launching a Leave-in Hair Mask. The company’s personal care portfolio will be adding SPINBRUSH CLEAR AND CLEAN TM.

Management expects 2022 reported sales growth in the range of 5-8% year over year, while organic sales are likely to rise 3-6%. The company expects various categories to remain at escalated consumption levels like laundry, gummy vitamins, laundry additives, hair growth supplements and cat litter in 2022.

The company expects to witness additional cost inflation to the tune of $155 million when compared with 2021 level. That being said, it is on track to offset price inflation. However, management expects to face inflation at a greater rate than effective price increases in 2022.

For 2022, the operating profit margin is likely to expand by 60-70 bps compared with the adjusted operating margin reported in the year-ago period. The gross margin is likely to be down from the 2021 level. Management anticipates earnings per share (EPS) between $3.14 and $3.26, up 4-8% compared with year-ago adjusted EPS. The metric is expected to be driven by operating income growth offset by a major rise inthe effective tax rate.

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Q1 Outlook

For the first quarter of 2022, the company expects a 3-4% increase in reported sales and organic sales are estimated to rise 1-2%. EPS are projected to be 75 cents in the quarter, suggesting a 9.6% decline from the year-ago quarter’s adjusted figure.

In the past three months, shares of this Zacks Rank #3 (Hold) company have increased 15.7% compared with the industry’s growth of 7%.

Hot Consumer Staples Bets

Some better-ranked stocks are Medifast, Inc. MED, United Natural Foods UNFI and Flower Foods FLO.

United Natural Foods, the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada, sports a Zacks Rank #1 (Strong Buy). Shares of UNFI have declined 15.3% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for United Natural Foods’ current financial year EPS and sales suggests growth of 8.8% and 5.1%, respectively, from the year-ago reported number. UNFI has a trailing four-quarter earnings surprise of 35.4%, on average.

Medifast, the manufacturer and distributor of weight loss, weight management, healthy living products, and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). Shares of Medifast have declined 4.5% in the past three months.

The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of about 63% and 49.3%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 17.3%, on average.

Flower Foods, the producer of packaged bakery foods in the United States, currently carries a Zacks Rank #2. Shares of FLO have gained 13% in the past three months.

The Zacks Consensus Estimate for Flower Foods’ 2022 sales suggests growth of 1.9% from the year-ago reported figure. FLO has a trailing four-quarter earnings surprise of 15.4%, on average.

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