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Church & Dwight (CHD) Curtails View Despite Q2 Earnings Beat
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Church & Dwight Co., Inc. (CHD - Free Report) reported second-quarter 2024 results, with the top and the bottom line increasing year over year. Quarterly earnings and net sales surpassed the Zacks Consensus Estimate. Results benefited from strong consumer demand across its portfolio.
Yet, management highlighted that category consumption growth, both in dollars and units, has moderated as consumers face financial pressures. In June and July 2024, dollar growth in eight main categories declined to 2% from 4.5% during the first five months of the year. Taking this into account, management expects full-year sales and profit at the lower end of its previous forecast.
Quarter in Detail
CHD posted adjusted earnings of 93 cents per share, beating the Zacks Consensus Estimate of 84 cents. The bottom line inched up 1.1% year over year, buoyed by better-than-expected sales growth and gross margin expansion.
Net sales of $1,511.2 million advanced 3.9% year over year and surpassed the Zacks Consensus Estimate of $1,508 million. Organic sales increased 4.7% due to gains from volume to the tune of 3.5% and the favorable product mix and pricing of 1.2%. We had expected organic sales growth of 4.1% in the quarter.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
The gross margin expanded 320 basis points (bps) to 47.1% on a one-time benefit from a favorable tariff ruling. Quarterly adjusted gross margin was 45.4%, up 150 bps, driven by enhanced productivity, higher volume and an improved product mix despite increased manufacturing costs.
Marketing expenses increased $20.2 million year over year to $152.4 million. As a percentage of net sales, the figure increased 100 bps to 10.1% on persistent investment in brands and new products. Adjusted SG&A expenses, as a percentage of net sales, expanded 20 bps to 14.4%, mainly due to investments in international operations, research and development and expenses associated with the Graphico acquisition. We had expected marketing and adjusted SG&A expenses, as a percentage of net sales, to increase by 200 and 40 bps, respectively.
Segment Details
Consumer Domestic: Net sales in the segment increased 3.8% to $1,170.6 million due to household and personal care sales growth. Our estimate for segment sales for the quarter was $1,165.4 million. Organic sales increased 3.8% due to favorable price and product mix (up 0.5%) and volume (up 3.3%). The uptick was backed by strength in THERABREATH mouthwash, HERO acne products, ARM & HAMMER Cat Litter, ARM & HAMMER Liquid Detergent and XTRA Liquid Detergent, partly offset by declines in the vitamin business and FLAWLESS.
Consumer International: Net sales in the segment increased 9% to $263.7 million. Our estimate for segment sales was $258.8 million. Organic sales were up 9.3%, driven by favorable pricing and product mix of 4.7% and higher volumes to the tune of 4.6%. Sales growth was mainly fueled by THERABREATH, vitamins and HERO.
Specialty Products: Sales in the segment declined 8.6% to $76.9 million, including the impact of winding down the Megalac business. Our estimate for segment sales was $80.7 million. Organic sales rose 3.9% due to volume growth (up 4.1%).
Other Updates
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $491.7 million and long-term debt of $2,207.6 million. For six months ended Jun 30, 2024, cash from operations totaled $499.9 million.
Capital expenditures were $76.6 million in the same time frame. The company continues to expect about $180 million in capital expenditures for 2024. It anticipates capital expenditures to return to nearly 2% of sales in 2025. For 2024, Church & Dwight expects cash flow from operations of nearly $1.08 billion, up from the prior forecast of $1.05 billion.
Image Source: Zacks Investment Research
2024 Guidance
Although the company anticipates its brands to outperform the categories in the second half of the year, it is adjusting the organic revenue forecast to about 4% growth, down from the previous range of 4-5% during 2024. Reported sales growth is projected to be slightly lower, around 3.5%, due to the effects of divestitures and adverse currency fluctuations.
The company is increasing its full-year forecast for adjusted gross margin expansion to approximately 100-110 bps, up from the previously-expected 75 bps increase. Management expects higher product pricing, improved mix, increased volume and enhanced productivity to offset the rise in manufacturing costs.
CHD anticipates marketing, as a percentage of sales, to be nearly 11%. Adjusted SG&A, as a percentage of sales, is projected to be higher year over year, up from the previous expectation of being flat. This upside reflects additional costs associated with the Graphico acquisition and higher incentive compensation than initially anticipated.
The company projects 2024 reported earnings per share (EPS) growth to be in the range of 12-13%, up from the previous forecast of 9.5-10.5% growth. Adjusted EPS growth is expected to be at the lower end of the 8-9% range.
Q3 View
For third-quarter 2024, Church & Dwight expects reported sales growth of about 2.5% and organic sales growth of nearly 3%. Management anticipates expanding gross margins and a substantial boost in marketing expenditures to support its innovation initiatives. The company anticipates quarterly adjusted earnings of 67 cents a share, suggesting a year-over-year decline of 10%.
The company’s shares have dropped 5.5% in the past three months against the industry’s 3% growth.
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year sales and earnings indicates a decline of 1.6% and 8.5%, respectively, from the prior-year reported level. THS has a negative trailing four-quarter average earnings surprise of 4.5%.
Philip Morris (PM - Free Report) , a tobacco company, has a trailing four-quarter earnings surprise of 1.8%, on average. PM currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Philip Morris’ current financial-year sales and earnings indicates growth of 5.8% and 6.3%, respectively, from prior-year reported levels.
Colgate-Palmolive (CL - Free Report) , which manufactures and sells consumer products, currently carries a Zacks Rank #2. CL delivered an earnings surprise of 4.8% in the trailing four quarters, on average.
The Zacks Consensus Estimate for Colgate-Palmolive’s current fiscal-year sales and earnings suggests growth of 3.8% and nearly 10.5%, respectively, from the year-ago reported numbers.
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Church & Dwight (CHD) Curtails View Despite Q2 Earnings Beat
Church & Dwight Co., Inc. (CHD - Free Report) reported second-quarter 2024 results, with the top and the bottom line increasing year over year. Quarterly earnings and net sales surpassed the Zacks Consensus Estimate. Results benefited from strong consumer demand across its portfolio.
Yet, management highlighted that category consumption growth, both in dollars and units, has moderated as consumers face financial pressures. In June and July 2024, dollar growth in eight main categories declined to 2% from 4.5% during the first five months of the year. Taking this into account, management expects full-year sales and profit at the lower end of its previous forecast.
Quarter in Detail
CHD posted adjusted earnings of 93 cents per share, beating the Zacks Consensus Estimate of 84 cents. The bottom line inched up 1.1% year over year, buoyed by better-than-expected sales growth and gross margin expansion.
Net sales of $1,511.2 million advanced 3.9% year over year and surpassed the Zacks Consensus Estimate of $1,508 million. Organic sales increased 4.7% due to gains from volume to the tune of 3.5% and the favorable product mix and pricing of 1.2%. We had expected organic sales growth of 4.1% in the quarter.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight Co., Inc. price-consensus-eps-surprise-chart | Church & Dwight Co., Inc. Quote
The gross margin expanded 320 basis points (bps) to 47.1% on a one-time benefit from a favorable tariff ruling. Quarterly adjusted gross margin was 45.4%, up 150 bps, driven by enhanced productivity, higher volume and an improved product mix despite increased manufacturing costs.
Marketing expenses increased $20.2 million year over year to $152.4 million. As a percentage of net sales, the figure increased 100 bps to 10.1% on persistent investment in brands and new products. Adjusted SG&A expenses, as a percentage of net sales, expanded 20 bps to 14.4%, mainly due to investments in international operations, research and development and expenses associated with the Graphico acquisition. We had expected marketing and adjusted SG&A expenses, as a percentage of net sales, to increase by 200 and 40 bps, respectively.
Segment Details
Consumer Domestic: Net sales in the segment increased 3.8% to $1,170.6 million due to household and personal care sales growth. Our estimate for segment sales for the quarter was $1,165.4 million. Organic sales increased 3.8% due to favorable price and product mix (up 0.5%) and volume (up 3.3%). The uptick was backed by strength in THERABREATH mouthwash, HERO acne products, ARM & HAMMER Cat Litter, ARM & HAMMER Liquid Detergent and XTRA Liquid Detergent, partly offset by declines in the vitamin business and FLAWLESS.
Consumer International: Net sales in the segment increased 9% to $263.7 million. Our estimate for segment sales was $258.8 million. Organic sales were up 9.3%, driven by favorable pricing and product mix of 4.7% and higher volumes to the tune of 4.6%. Sales growth was mainly fueled by THERABREATH, vitamins and HERO.
Specialty Products: Sales in the segment declined 8.6% to $76.9 million, including the impact of winding down the Megalac business. Our estimate for segment sales was $80.7 million. Organic sales rose 3.9% due to volume growth (up 4.1%).
Other Updates
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $491.7 million and long-term debt of $2,207.6 million. For six months ended Jun 30, 2024, cash from operations totaled $499.9 million.
Capital expenditures were $76.6 million in the same time frame. The company continues to expect about $180 million in capital expenditures for 2024. It anticipates capital expenditures to return to nearly 2% of sales in 2025. For 2024, Church & Dwight expects cash flow from operations of nearly $1.08 billion, up from the prior forecast of $1.05 billion.
Image Source: Zacks Investment Research
2024 Guidance
Although the company anticipates its brands to outperform the categories in the second half of the year, it is adjusting the organic revenue forecast to about 4% growth, down from the previous range of 4-5% during 2024. Reported sales growth is projected to be slightly lower, around 3.5%, due to the effects of divestitures and adverse currency fluctuations.
The company is increasing its full-year forecast for adjusted gross margin expansion to approximately 100-110 bps, up from the previously-expected 75 bps increase. Management expects higher product pricing, improved mix, increased volume and enhanced productivity to offset the rise in manufacturing costs.
CHD anticipates marketing, as a percentage of sales, to be nearly 11%. Adjusted SG&A, as a percentage of sales, is projected to be higher year over year, up from the previous expectation of being flat. This upside reflects additional costs associated with the Graphico acquisition and higher incentive compensation than initially anticipated.
The company projects 2024 reported earnings per share (EPS) growth to be in the range of 12-13%, up from the previous forecast of 9.5-10.5% growth. Adjusted EPS growth is expected to be at the lower end of the 8-9% range.
Q3 View
For third-quarter 2024, Church & Dwight expects reported sales growth of about 2.5% and organic sales growth of nearly 3%. Management anticipates expanding gross margins and a substantial boost in marketing expenditures to support its innovation initiatives. The company anticipates quarterly adjusted earnings of 67 cents a share, suggesting a year-over-year decline of 10%.
The company’s shares have dropped 5.5% in the past three months against the industry’s 3% growth.
Some Better-Ranked Staple Bets
Treehouse Foods (THS - Free Report) is a manufacturer of packaged foods and beverages. The company currently flaunts 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 Treehouse Foods’ current financial-year sales and earnings indicates a decline of 1.6% and 8.5%, respectively, from the prior-year reported level. THS has a negative trailing four-quarter average earnings surprise of 4.5%.
Philip Morris (PM - Free Report) , a tobacco company, has a trailing four-quarter earnings surprise of 1.8%, on average. PM currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Philip Morris’ current financial-year sales and earnings indicates growth of 5.8% and 6.3%, respectively, from prior-year reported levels.
Colgate-Palmolive (CL - Free Report) , which manufactures and sells consumer products, currently carries a Zacks Rank #2. CL delivered an earnings surprise of 4.8% in the trailing four quarters, on average.
The Zacks Consensus Estimate for Colgate-Palmolive’s current fiscal-year sales and earnings suggests growth of 3.8% and nearly 10.5%, respectively, from the year-ago reported numbers.