Yahoo Finance Church & Dwight (CHD) Q1 Earnings Beat, Organic Sales Up Y/Y
Church & Dwight Co., Inc. CHD has once again demonstrated its resilience and prowess in the consumer goods market as it unveiled its first-quarter 2024 results. Both the top and bottom lines not only beat the Zacks Consensus Estimate but also increased year over year.
The stellar consumer demand witnessed across CHD's diverse portfolio underscored the effectiveness of its strategic initiatives, with all three divisions reporting substantial growth. Volume emerged as a key driver of organic growth, signaling promising prospects for sustained momentum in the forthcoming quarters. Furthermore, the company's focus on enhancing operational efficiencies, coupled with prudent working capital management, bolstered cash flow generation.
Quarter in Detail
Church & Dwight posted adjusted earnings of 96 cents per share, which beat the Zacks Consensus Estimate of 86 cents. The bottom line rose 12.9% year over year, buoyed by better-than-expected sales growth and gross margin expansion.
Net sales of $1,503.3 million advanced 5.1% year over year and surpassed the Zacks Consensus Estimate of $1,492 million. Organic sales increased 5.2% due to gains from volume to the tune of 3.7%, as well as the favorable product mix and pricing of 1.5%. We had expected organic sales growth of 4% in the quarter.
The gross margin expanded 220 basis points (bps) to 45.7%. The upside can be attributed to improved productivity, volume, mix and pricing, net of increased manufacturing expenses.
Marketing expenses increased by $29.7 million year over year to $152 million. As a percentage of net sales, the figure rose 150 bps to 10.1%. Adjusted SG&A expenses, as a percentage of net sales, escalated 80 bps to 14.8%, mainly due to investments in International and R&D. We had expected both marketing and adjusted SG&A expenses, as a percentage of net sales, to increase 100 bps.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight Co., Inc. price-consensus-eps-surprise-chart | Church & Dwight Co., Inc. Quote
Segment Details
Consumer Domestic: Net sales in the segment increased 4.3% to $1,165.2 million due to both household and personal care sales growth. Our estimate for segment sales for the quarter was $1,161.6 million.
Organic sales increased 4.3% due to favorable price and product mix (up 1%) and volume (up 3.3%). The uptick was backed by strength in THERABREATH mouthwash, HERO acne treatments, ARM & HAMMER baking soda, ARM & HAMMER Cat Litter, XTRA Liquid Detergent, and BATISTE dry shampoo, partly offset by softness in the vitamin business and WATERPIK.
Consumer International: Net sales in the segment increased 10.6% to $255 million. Our estimate for segment sales was $248.8 million. Net sales were impacted by the currency headwind to the tune of 1.8%. Organic sales were up 8.8%, driven by favorable pricing and product mix of 3.4% and higher volumes to the tune of 5.4%. Organic sales growth was mainly fueled by THERABREATH, STERIMAR and HERO.
Specialty Products: Sales in the segment showed a modest increase of 1% to $83.1 million, including the impact of winding down the Megalac business. Our estimate for segment sales was $79.5 million. Organic sales rose 7.2% due to higher price and product mix (up 4.2%) and volume growth (up 3%).
Other Updates
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $349.7 million and long-term debt of $2,202.8 million. For the first three months of 2024, cash from operations totaled $263 million.
Capital expenditures were $46.3 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 $1.05 billion, up from the prior forecast of $1 billion.
2024 Guidance
Church & Dwight continues to expect 2024 reported and organic sales growth of 4-5%. Management anticipates gross margin expansion of 75 bps, up from the prior projected range of 50-75 bps year over year.
The company expects to witness a rise in manufacturing costs, mainly due to capacity-related investments, a rise in third-party manufacturing expenses and moderate commodity inflation. Carryover product pricing, mix, favorable volume and productivity are likely to more than offset such costs.
Church & Dwight anticipates marketing, as a percentage of sales, to be nearly 11%. SG&A is expected to be flat as a percent of sales compared to 2023.
The company projects 2024 adjusted earnings per share growth of 8-9%, up from the prior guidance of a 7-9% jump. This projection includes a marginally dilutive earnings impact resulting from the Graphico buyout.
Q2 View
For the second quarter of 2024, Church & Dwight expects reported sales growth of about 3.5% and organic sales growth of roughly 4%. Management foresees modest expansion in the gross margin, a rise in marketing expenditure to bolster the innovation pipeline and an increase in SG&A expenses. The company anticipates adjusted earnings of 83 cents a share, which suggests a year-over-year decline of 10%.
Shares of the company have risen 5.7% in the past three months compared with the industry’s 4.5% growth.
3 Strong Bets
Here, we have highlighted three better-ranked stocks, namely Colgate-Palmolive CL, Vital Farms VITL and Celsius Holdings CELH.
Colgate-Palmolive, which manufactures and sells consumer products, currently carries a Zacks Rank #2 (Buy). CL delivered a positive earnings surprise of 4.4% in the trailing four quarters, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Colgate-Palmolive’s current fiscal-year sales and earnings calls for growth of 4% and nearly 9%, respectively, from the year-ago reported numbers.
Vital Farms offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 155.4%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 19.5% and nearly 30.5%, respectively, from the year-ago reported numbers.
Celsius Holdings, which develops, processes, markets, distributes and sells functional energy drinks and liquid supplements, currently carries a Zacks Rank #2. CELH has a trailing four-quarter earnings surprise of 67.4%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings implies growth of 41.6% each from the year-ago reported numbers.
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