Church & Dwight Sales to Gain on International Unit & More

Zacks Equity Research - Posted 4 years ago
Church & Dwight's (CHD) top line has been impressive for a while, gaining from strong Consumer International unit, buyouts and innovation.

Church & Dwight Co., Inc. CHD is consistently benefiting from strength in the Consumer International unit, which in turn has been boosting overall sales trend. Notably, the company’s solid acquisitions and focus on product innovations are key drivers behind its growth story.

We expect these factors to continue driving this Zacks Rank #2 (Buy) stock that has rallied nearly 16% in the past three months, outpacing the industry’s growth of 9%. To top it, the Zacks Consensus Estimate for 2019 has gone up from $2.46 to $2.48 over the past 60 days.

Church & Dwight’s Key Drivers

The company’s top line has been impressive for a while. With first-quarter 2019 results, Church & Dwight marked its seventh consecutive quarter of sales surprise. Sales in the quarter gained from continued category growth and healthy market share gains. Also, the company has been witnessing organic sales growth for quite some time now, backed by solid focus on product innovations. The company now anticipates sales growth of 5-6% in 2019, owing to the acquisition of FLAWLESS. Organic sales are expected to rise 3.5%, driven by effective product launches across most categories.

Church & Dwight has acquired a number of premium high-margin brands, which have been contributing significantly to top-line growth. To this end, the company recently concluded the buyout of FLAWLESS and FINISHING TOUCH (“FLAWLESS”), which is a significant inclusion to the specialty haircare category. This is expected to contribute to the company’s top line in 2019. Some of its previous noteworthy acquisitions are Waterpik (in August 2017), Agro BioSciences (in May 2017) and VIVISCAL business (in January 2017).

Further, the Consumer International business has been a significant sales driver for the company. In first-quarter 2019, organic sales in this segment increased 8.5% on volume growth of 10.2%. Impetus was mainly provided by FEMFRESH, BATISTE, STERIMAR, and ARM & HAMMER liquid laundry detergent in the Global Markets Group business, ARM & HAMMER clumping cat litter and liquid laundry detergent in Canada, BATISTE in Germany, and WATERPIK in several countries. In fact, ARM & HAMMER is the company’s biggest international brand, which is well positioned to grow further in emerging markets.

Overall Consumer International sales also remained strong, rising 3.3%, backed by broad-based sales growth for household and personal care products, and improvement in Global Markets Group business. As international arena is a bright spot for the company, it continues to invest in this segment to sustain strong sales growth.

Clearly, Church & Dwight is set to sustain its momentum on the back of its sales drivers and focus on boosting margins.

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