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Will Strong Brand Portfolio Aid Church & Dwight's (CHD) Growth?
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Church & Dwight Co. Inc. (CHD - Free Report) has been benefiting from a strong brand portfolio, strategic buyouts, aggressive pricing actions and a solid online show.
This led to robust fourth-quarter 2022 results, wherein the bottom line and top line beat the Zacks Consensus Estimate. Net sales of $1,436 million inched up 4.9% year over year. The company’s U.S. portfolio saw consumption growth in 13 out of 17 categories.
Management expects 2023 reported sales growth of 5-7%. For the first quarter of 2023, the company expects an approximately 4% increase in reported sales. The company anticipates 2023 organic sales growth in the range of 2-4%. For the first quarter of 2023, organic sales growth is anticipated to be approximately 1%.
Let’s delve deeper into the factors aiding the stock.
Image Source: Zacks Investment Research
Strong Brand Portfolio & Innovation: Key Factors
Church & Dwight’s impressive brand portfolio and innovation are aiding the company’s growth. CHD recently completed its buyout of the Hero Mighty Patch brand (HERO) and other acne treatment products. It also concluded the integration of the THERABREATH buyout, which marks the company's 14th power brand. These 14 power brands contribute approximately 85% to the company’s revenues and profits.
We note that the company’s recent acquisitions, ZICAM, THERABREATH and HERO, experienced double-digit consumption growth and market share gains in the fourth quarter.
CHD also remains focused on product innovation for further growth. It is launching ARM & HAMMER Hardball to enable it to capture a greater share of the lightweight litter category. Also, the TROJAN brand is building on the success of the Raw franchise by offering the new TROJAN Raw Non-Latex condom. Another notable launch is THERABREATH’s three new fluoride mouthwashes. The company also announced the launch of MICROPOINT FOR BLEMISHES XL patches under the HERO brand owing to the success of its MIGHTY PATCH products.
What Else is Driving Growth
The company’s aggressive pricing efforts bode well. During the fourth quarter of 2022, organic sales inched up 0.4% owing to favorable pricing of 4.2%, the metric was somewhat offset by a volume decline of 3.8%.
Another factor working for Church & Dwight is the online channel. During 2022, the company’s global online sales, as a percentage of total sales, were 16%, up 100 basis points (bps) from the year-ago period.
Headwinds to Overcome
The company has been witnessing increased raw material, manufacturing and component costs, which dented the gross margin in the fourth quarter of 2022. In the quarter, Church & Dwight’s gross margin shrunk 50 bps to 42%.
For 2023, management expects additional inflation headwinds of $125 million due to escalated commodity and material costs. It also expects to raise marketing as a percentage of sales to about 10.5% in 2023, up 50 bps from the year-ago period to sustain the current consumption momentum.
For the first quarter of 2023, CHD expects adjusted earnings per share (EPS) of 75 cents, down 10% from the year-ago quarter’s adjusted EPS. The downside can be attributed to the adverse impacts of softness in discretionary brands.
Wrapping Up
CHD’s strong brand portfolio, online strength, pricing actions and strategic buyouts are likely to offset the hurdles stemming from cost inflation in the near term. A long-term earnings growth rate of 7.6% raises optimism in the stock.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 11.9% compared with the industry's 7.2% growth.
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 10.6% and 0.8%, respectively, from the year-ago reported numbers.
The Hershey Company is the largest chocolate manufacturer in North America. It currently carries a Zacks Rank of 2 (Buy). HSY has a trailing four-quarter earnings surprise of 11.3%, on average.
The Zacks Consensus Estimate for Hershey’s current financial year sales and earnings suggests growth of 7.7% and 10%, respectively, from the prior-year reported numbers.
The Simply Good Foods Company product portfolio consists primarily of nutrition bars, ready-to-drink shakes and currently carries a Zacks Rank of 2. SMPL has a trailing four-quarter earnings surprise of 20.2%, on average.
The Zacks Consensus Estimate for SMPL’s current financial year sales and earnings suggests growth of 6.4% and 2.5%, respectively, from the corresponding year-ago reported figures.
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Will Strong Brand Portfolio Aid Church & Dwight's (CHD) Growth?
Church & Dwight Co. Inc. (CHD - Free Report) has been benefiting from a strong brand portfolio, strategic buyouts, aggressive pricing actions and a solid online show.
This led to robust fourth-quarter 2022 results, wherein the bottom line and top line beat the Zacks Consensus Estimate. Net sales of $1,436 million inched up 4.9% year over year. The company’s U.S. portfolio saw consumption growth in 13 out of 17 categories.
Management expects 2023 reported sales growth of 5-7%. For the first quarter of 2023, the company expects an approximately 4% increase in reported sales. The company anticipates 2023 organic sales growth in the range of 2-4%. For the first quarter of 2023, organic sales growth is anticipated to be approximately 1%.
Let’s delve deeper into the factors aiding the stock.
Image Source: Zacks Investment Research
Strong Brand Portfolio & Innovation: Key Factors
Church & Dwight’s impressive brand portfolio and innovation are aiding the company’s growth. CHD recently completed its buyout of the Hero Mighty Patch brand (HERO) and other acne treatment products. It also concluded the integration of the THERABREATH buyout, which marks the company's 14th power brand. These 14 power brands contribute approximately 85% to the company’s revenues and profits.
We note that the company’s recent acquisitions, ZICAM, THERABREATH and HERO, experienced double-digit consumption growth and market share gains in the fourth quarter.
CHD also remains focused on product innovation for further growth. It is launching ARM & HAMMER Hardball to enable it to capture a greater share of the lightweight litter category. Also, the TROJAN brand is building on the success of the Raw franchise by offering the new TROJAN Raw Non-Latex condom. Another notable launch is THERABREATH’s three new fluoride mouthwashes. The company also announced the launch of MICROPOINT FOR BLEMISHES XL patches under the HERO brand owing to the success of its MIGHTY PATCH products.
What Else is Driving Growth
The company’s aggressive pricing efforts bode well. During the fourth quarter of 2022, organic sales inched up 0.4% owing to favorable pricing of 4.2%, the metric was somewhat offset by a volume decline of 3.8%.
Another factor working for Church & Dwight is the online channel. During 2022, the company’s global online sales, as a percentage of total sales, were 16%, up 100 basis points (bps) from the year-ago period.
Headwinds to Overcome
The company has been witnessing increased raw material, manufacturing and component costs, which dented the gross margin in the fourth quarter of 2022. In the quarter, Church & Dwight’s gross margin shrunk 50 bps to 42%.
For 2023, management expects additional inflation headwinds of $125 million due to escalated commodity and material costs. It also expects to raise marketing as a percentage of sales to about 10.5% in 2023, up 50 bps from the year-ago period to sustain the current consumption momentum.
For the first quarter of 2023, CHD expects adjusted earnings per share (EPS) of 75 cents, down 10% from the year-ago quarter’s adjusted EPS. The downside can be attributed to the adverse impacts of softness in discretionary brands.
Wrapping Up
CHD’s strong brand portfolio, online strength, pricing actions and strategic buyouts are likely to offset the hurdles stemming from cost inflation in the near term. A long-term earnings growth rate of 7.6% raises optimism in the stock.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 11.9% compared with the industry's 7.2% growth.
3 Key Picks
Some top-ranked stocks are Inter Parfums (IPAR - Free Report) , The Hershey Company (HSY - Free Report) and The Simply Good Foods Company (SMPL - Free Report) .
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 10.6% and 0.8%, respectively, from the year-ago reported numbers.
The Hershey Company is the largest chocolate manufacturer in North America. It currently carries a Zacks Rank of 2 (Buy). HSY has a trailing four-quarter earnings surprise of 11.3%, on average.
The Zacks Consensus Estimate for Hershey’s current financial year sales and earnings suggests growth of 7.7% and 10%, respectively, from the prior-year reported numbers.
The Simply Good Foods Company product portfolio consists primarily of nutrition bars, ready-to-drink shakes and currently carries a Zacks Rank of 2. SMPL has a trailing four-quarter earnings surprise of 20.2%, on average.
The Zacks Consensus Estimate for SMPL’s current financial year sales and earnings suggests growth of 6.4% and 2.5%, respectively, from the corresponding year-ago reported figures.