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Church & Dwight: Key Takeaways from Its Q2 Earnings


Jul. 31 2019, Published 11:54 a.m. ET

  • Church & Dwight reported stronger-than-expected second-quarter earnings.
  • The company had organic sales growth over 4% for the fifth consecutive quarter.
  • The sales and earnings will likely sustain the momentum.

Church & Dwight (CHD) announced better-than-expected second-quarter results on Tuesday. The net sales beat analysts’ estimate, which reflected strong organic sales. Commenting on the second-quarter results, Church & Dwight’s CEO, Matthew Farrell, stated that the organic revenues were “exceptionally strong.” The organic sales also beat management’s expectation of 3.5%.

The company reported net sales of $1.1 billion, which beat analysts’ estimate. The revenues rose about 5% on a YoY basis, which reflected strong growth in global consumer products.

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Church & Dwight’s gross margin increased by 30 basis points to 44.6%. Higher pricing and productivity savings supported the margin expansion. However, input cost headwinds continued to hurt. The operating margin increased by 40 basis points to 17.3%, which reflected lower marketing expenses and gross margin expansion.

Church & Dwight posted an adjusted EPS of $0.57, which rose 16.3% YoY and beat analysts’ estimate of $0.52. Higher organic sales, margin expansion, and the lower effective tax rate drove Church & Dwight’s bottom line.

Church & Dwight’s impressive organic sales 

Category growth, market share gains, new products, and innovation continue to drive Church & Dwight’s organic sales growth. The company’s organic sales rose 4.9% due to the favorable product mix and increased pricing. The organic sales rose 9.1% in the consumer international segment. The underlying sales rose 5% in the consumer domestic business.

Notably, Church & Dwight’s organic sales increased at more than a 4% rate for the fifth consecutive quarter. The company’s prices and product mix continued to improve for the fourth consecutive quarter.

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Besides Church & Dwight, other major consumer packaged goods manufacturers also benefited from the higher pricing and product mix. Procter & Gamble (PG) posted its best organic sales in a decade. Also, volumes contributed significantly to the underlying sales growth. The company’s organic sales rose 7% during the last reported quarter.

Meanwhile, Colgate-Palmolive’s (CL) organic revenues increased 4% in the second quarter. Higher net selling prices contributed 3% to the organic sales growth rate. Kimberly-Clark’s (KMB) organic sales increased 5%. Higher organic sales reflected a 5% increase in net selling prices.

Higher outlook

Church & Dwight expects its fiscal net sales to increase 6%. Earlier, the company expected the net sales to see 5%–6% growth. The organic sales will likely increase 4% in 2019—up from the previous growth guidance of 3.5%.

The gross margin will likely increase by 80 basis points in 2019—up from its earlier guidance of 50 basis points. Now, the adjusted EPS will likely be $2.47 in 2019—up about 9%. Earlier, the company’s management expected the adjusted EPS to be $2.43–$2.47.


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