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Strong 1Q Earnings for Church & Dwight

Zacks Equity Research

Leading consumer products company, Church & Dwight Co. Inc. (CHD) posted first-quarter 2013 earnings of 76 cents a share that surpassed the Zacks Consensus Estimate of 72 cents and increased 15.2% from 66 cents earned in the comparable prior-year quarter.

This Zacks Rank #3 (Hold) stock witnessed an improvement of 12.8% in its top line to $779.3 million and surpassed the Zacks Consensus Estimate of $777 million. Organic sales increased 2%, reflecting 2.4% growth in volume, partially offset by negative impact of 0.4% due to pricing and adverse product mix.

In terms of growth in bottom line, Church & Dwight's results fared better than other players in the household products industry. Clorox Corporation (CLX) came up with lower-than-expected earnings results for the third-quarter of fiscal 2013. The company’s earnings of $1.00 per share missed the Zacks Consensus Estimate of $1.06 and fell nearly 3.8% from the year-ago quarter’s adjusted earnings of $1.04.

Colgate-Palmolive Company (CL) reported first-quarter 2013 adjusted earnings of $1.32 per share, rising 6% from the year-ago quarter’s adjusted earnings of $1.24 and in line with the Zacks Consensus Estimate.

Coming to Church & Dwight results, gross profit increased 15.7% to $350.1 million compared with $302.5 million in the prior-year quarter. Moreover, gross margin expanded 110 basis points to 44.9%, reflecting operating efficiencies and flat commodity prices.

Operating income escalated 18.6% year over year to 169.3 million during the quarter. Moreover, operating margin expanded approximately 100 basis points to 21.7%.

Segment Details

Consumer Domestic's net sales elevated 15.7% year over year to $591 million, driven by a 42.5% jump in personal care products revenues to $232.3 million coupled with a 3.2% growth in household products revenues to $358.7 million.

Organic sales rose 1.4% during the quarter, reflecting higher sales of ARM & HAMMER liquid laundry detergents and unit dose laundry detergent. Moreover, higher sales of TROJAN products, OXICLEAN laundry additives and FIRST RESPONSE diagnostic kits boosted results. This was, however, partially offset by sluggish sales of KABOOM cleaners and ARM & HAMMER powdered laundry detergent.

Increase in sales represents a 1.8% improvement in volume, while product mix and pricing unfavorably impacted sales by 0.4%.

Consumer International's sales increased 6.5% year over year to $129.3 million. Organic sales increased 5.2% attributable to healthy sales in Australia, UK and Mexico. The rise in organic revenue reflected 6.2% growth in volume, while product mix and pricing unfavorably impacted sales by 1%.

Specialty Products' sales increased marginally to $59 million. Moreover, organic sales inched up 0.8%.The increase reflected favorable contribution from product pricing of 1.2%, while volume decline of 0.4% partially offset the sales growth.

Other Financial Details

Church & Dwight, which competes with Proctor & Gamble Company (PG), ended the quarter with cash and cash equivalents of $259.6 million, long-term debt of $649.4 million and shareholders’ equity of $2,085.2 million.

During the quarter, the company repurchased 0.9 million shares worth $50 million. Moreover, it generated operating cash flow of $72.3 million and incurred $10.4 million in capital expenditures.


Management stood by its earlier guidance and expects innovative product launches to continue boosting organic sales in 2013. The company reiterated organic sales growth in the range of 3%-4%. Church & Dwight forecasts commodity prices to remain stable and expects gross margin to rise by 25 –50 basis points.

Management anticipates earnings per share to be $2.79 for 2013, up 14% year over year. For the second quarter, Church & Dwight expects organic sales growth of 3% to 4% and earnings per share of 58 cents. The current Zacks Consensus Estimates for the second quarter and full year are 72 cents and $2.81.

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