Church & Dwight (CHD) reported healthy fourth-quarter results on February 5. The company sustained its sales and earnings momentum thanks to the higher-than-expected organic sales and lower effective tax rate. However, it missed analysts’ EPS estimate, which irked investors. CHD stock closed at $60.46, down 7.5% on February 5.
Improved volumes, higher pricing, and favorable mix drove the company’s organic sales, and in turn, its top line. However, margins continued to decline, reflecting the negative impact of tariffs coupled with higher commodities and transportation costs.
Weak margins, incremental marketing investments, and higher incentive compensation limited the bottom-line growth. Church & Dwight faces tough YoY comparisons, which is likely to restrict the growth rate. However, the recent pullback in its stock could well be an opportunity to become constructive in the stock as Church & Dwight works to sustain momentum in coming quarters. Higher pricing, improved volumes led by innovation and continued category growth are likely to drive its sales and earnings. Management expects sales and earnings to benefit from new product launches, increased pricing, and margin expansion.
Including yesterday’s decline, CHD stock is now down 8.1% on a YTD basis. In comparison, Procter & Gamble (PG) and Colgate-Palmolive (CL) stock are up 6.0% and 8.8%, respectively, so far this year. Meanwhile, Kimberly-Clark (KMB) and Clorox (CLX) stock are down 1.5% and 0.9%.
The Consumer Staples Select Sector SPDR Fund (XLP) is up 5.5%, while the S&P 500 Index has risen by 9.2% YTD.