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Factors to Watch Ahead of Church & Dwight (CHD) Q1 Earnings

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Church & Dwight Co., Inc. CHD is likely to witness year-over-year growth in the top line, when it reports first-quarter 2021 numbers on Apr 29. The Zacks Consensus Estimate for revenues is pegged at $1,208 million, which suggests growth of 3.7% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for earnings has declined a cent in the past seven days to 80 cents per share, which however indicates a decrease of 3.6% from the year-ago quarter’s reported figure. Notably, this developer, manufacturer and marketer of household, personal care and specialty products has a trailing four-quarter earnings surprise of almost 9%, on average. In the last reported quarter, the company’s earnings came in line with the Zacks Consensus Estimate.

Key Factors to Note

Church & Dwight has been gaining from rising consumer demand amid the coronavirus-led increased at-home consumption. This boosted the company’s fourth-quarter 2020 results, which gained from strong demand for household and personal care products owing to consumers’ increased preference for essential items amid the pandemic. The company, on its fourth-quarter earnings call, said that it expects 2021 to be another solid year, wherein it anticipates a number of categories to continue seeing high consumption, such as gummy vitamins, laundry additives, hair growth supplements and cat litter.

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

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

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

Certainly, a number of brands have been gaining on increased at-home grooming and self-care trends amid the pandemic. Gummy vitamins have been seeing increased household penetration and management remains on track to supplement its manufacturing capacity with third-party assistance to cater to the rising demand in this category. Further, the company then said that it anticipates a modest improvement in the laundry category. Further, Church & Dwight’s e-commerce sales have been playing a strong role amid the pandemic, backed by consumers’ accelerated online shopping preferences. These factors also bode well for the quarter under review. Additionally, Church & Dwight has been gaining from its buyouts and focus on innovation.

That being said, rising costs associated with the COVID-19 pandemic and high tariffs pose concerns for the company. During fourth-quarter 2020, the company’s gross margin declined 280 basis points to 43% due to increased manufacturing costs, largely stemming from outsourcing, pandemic-led expenses, awards to supply-chain workers and elevated tariffs. Also, marketing expenses flared up 24% to $201.6 million. Management on its last earnings call said that, in 2021, marketing costs are likely to rise in dollar terms, while the same is expected to contract 30 bps, as a percentage of sales. Also, the company expects inflation and tariff-related concerns to stay in 2021, though these are anticipated to be countered by productivity, a decline in pandemic-led additional costs and trade promotion efficacy. Incidentally, the company expects inflation and COVID-19 costs to have an adverse impact of roughly 130 bps on the gross margin.

For the first quarter of 2021, management expects a year-over-year contraction in gross margin. Adjusted earnings per share are expected to be 80 cents, indicating a decline of 4% from the year-ago quarter’s figure. This reflects increased marketing spend to support product introductions.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Church & Dwight this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Church & Dwight currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.42%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Sysco Corporation SYY currently has an Earnings ESP of +5.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here

Medifast MED has an Earnings ESP of +6.25% and a Zacks Rank #3, currently.

Monster Beverage Corporation MNST has an Earnings ESP of +0.41% and a Zacks Rank #3, at present.

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Church & Dwight Co., Inc. (CHD) : Free Stock Analysis Report

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Sysco Corporation (SYY) : Free Stock Analysis Report

MEDIFAST INC (MED) : Free Stock Analysis Report

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