Church & Dwight Co., Inc. CHD put up a stellar show in 2018, with shares of the company having surged almost 33% so far this year, easily crushing the industry’s growth of close to 5%. This Zacks Rank #2 (Buy) stock has been riding on its solid surprise history, backed by strength in its Consumer International segment, benefits from acquisitions and impressive organic sales trend.
Let’s delve deeper and see if this provider of personal care products can sustain the solid momentum in 2019.
Consumer International Strength
The company’s Consumer International business has been consistently contributing to its 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. Also, ARM & HAMMER remains the company’s biggest international brand, which is well positioned to grow further in emerging markets. Further, overall Consumer International sales remained strong, increasing 6.9% owing to recent acquisitions, broad-based sales growth for household and personal care products, and improvements in export business. The company is also opening new offices to support increase in export business and expects it to remain strong. As international arena is a bright spot for the company, it continues to invest in this segment to sustain strong sales growth.
Organic Sales Trend Looks Impressive
Church & Dwight has been witnessing organic sales growth for quite some time now, backed by its focus on product innovations. Evidently, organic sales grew 4.7% in the third quarter, preceded by 4.4% rise in the second quarter and 3.8% growth in the first quarter. Speaking of the third quarter, organic sales growth came ahead of the company’s guidance of 3% and was driven by a 5.4% rise in global consumer products growth. This, in turn, was fueled by higher volumes (up 3.7%) along with positive product mix and pricing of 1.7%. Moreover, for 2018, organic sales are anticipated to rise 4%, up from 3.5% expected earlier.
Focus on Buyouts – a Key Driver
Church & Dwight, which started with only ARM & HAMMER, has acquired a number of premium brands over the years, which have been contributing significantly to top-line growth. Some of the noteworthy acquisitions of the company include Waterpik (in Aug 2017), Agro BioSciences (in May 2017) and VIVISCAL business (in January 2017). Prior to that, the acquisitions of ANUSOL and RECTINOL brands from Johnson & Johnson in December 2016 helped the company boost its business internationally.
Stellar Past Record & Outlook Raise Optimism
Church & Dwight’s third-quarter 2018 results marked the company’s eighth and fifth consecutive quarter of positive earnings and sales surprise, respectively. While earnings gained from higher sales and lower taxes, sales were backed by continued category growth and healthy market share gains. Markedly, the company witnessed improvements in 11 out of 15 categories. We expect such upsides to continue aiding the company’s performance in the forthcoming periods. Incidentally, the company expects year-over-year sales growth of more than 9% in 2018. Further, the company envisions earnings per share of $2.27. On an adjusted basis, earnings are expected to grow 17%. For the fourth quarter of 2018, management forecasts net sales to increase 3%. Earnings are projected at 57 cents per share, depicting a rise of 10% on an adjusted basis.
Clearly, Church & Dwight is set to continue adding new leaves to its growth story in 2019 and most likely remain a preferred pick for investors.
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