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Church & Dwight Outperforms Peers in EPS Growth

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Cost savings driving bottom line

Consumer product companies exceeded Wall Street’s estimates during their last reported quarters, thanks to cost-saving measures amid moderating category growth in the US. But what sets Clorox (CLX) and Church & Dwight (CHD) apart is their strong EPS (earnings per share) growth, which has come on the back of balanced top- and bottom-line performance.

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Comparing performance

Church and Dwight’s adjusted EPS of $0.52 in 1Q17 jumped 20.9% YoY (year-over-year), as strong sales and volumes growth coupled with aggressive productivity measures boosted bottom-line growth. The company now expects its 2017 adjusted EPS to grow 8.5%, driven by new product launches and cost cutting initiatives.

Clorox (CLX) reported its fiscal 3Q17 results on May 3, 2017, and showed a YoY growth of 8.3% in its bottom line. Higher sales driven by volume growth and higher pricing, coupled with cost-cutting and productivity measures, helped grow its EPS. A lower effective tax rate also helped CLX’s bottom line results, and the management expects EPS to be in the range of $5.25–$5.35, which would represent a growth of 8% based on the midpoint of the guidance range. 

PG, KMB, and CL all banking on cost control

Colgate-Palmolive’s (CL) 1Q17 results were driven by productivity and cost saving initiatives amid a soft sales environment. The company’s adjusted EPS of $0.67 came ahead of Wall Street’s consensus estimate, increasing 6.3% YoY. CL’s management has called for low-single-digit EPS growth for 2017.

Kimberly-Clark reported a 2.6% YoY growth in EPS for its latest quarter, driven by the company’s FORCE (Focused on Reducing Costs Everywhere) program. For 2017, the management forecasts EPS to be in the range of $6.20–$6.35, as compared to its adjusted EPS of $6.03 in 2016.

Procter & Gamble’s (PG) last quarter EPS benefitted from stringent cost-control measures and lower taxes. The company expects mid–single-digit growth in EPS for fiscal 2017.

Outlook

The bottom-line performances of consumer products companies should mainly be dependent on cost savings in coming quarters as category growth moderates. Higher input costs, lower pricing due to increased competition, and increased investments to support new product launches will also likely continue to dent financials.

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