Church & Dwight (CHD) Best estimates for fourth quarter earnings, sales up

Church & Dwight Co., Inc. CHD reported strong results in the fourth quarter of 2021, with revenue and net income increasing year on year. The company’s earnings and net sales exceeded Zacks’ consensus estimate.

Quarter in detail

Church & Dwight posted adjusted earnings of 64 cents per share that beat Zacks’ consensus estimate of 58 cents and rose 20.8% from the year-ago quarter level. This increase was mainly supported by higher than expected revenues from the company’s domestic activities. In addition, the reduced tax rate was an advantage. This was somewhat offset by increased marketing investments for the company’s brands as well as higher incentive compensation.

Net sales of $1,368.7 million were up 5.7% year-over-year and topped Zacks’ consensus estimate of $1,348.8 million. Results were supported by strong consumption for the company’s brands. Organic sales increased by 4.3%, with a favorable price and product mix of 6%. However, volumes decreased by 1.7%. The company recorded consumer gains in 11 of 16 national categories.

Church & Dwight Co., Inc. EPS Awards and Surprise

Church & Dwight Co., Inc. price-eps-surprise | Quote from Church & Dwight Co., Inc.

Gross margin decreased by 50 basis points (bps) to 42.5% due to the negative impact of higher manufacturing costs, net of price and productivity.

Marketing expenses were flat year over year at $201.1 million. As a percentage of sales, the figure fell 90 basis points to 14.7%. Adjusted SG&A expense, as a percentage of sales, increased 50 basis points to 14.9%, driven by acquisition costs, asset write-offs and higher compensation costs.

Segment details

Domestic Consumer: Segment net sales increased 5.1% to $1,041.7 million, driven by higher sales of household and personal care products. Organic sales increased by 3.6%, driven by an increase in prices and product mix, somewhat offset by reduced volumes. OXICLEAN Stain Remover Powder, ARM & HAMMER Clumping Cat Litter, ARM & HAMMER Liquid Detergent, ARM & HAMMER Scent Boosters and BATISTE Dry Shampoo supported the segment.

International Consumer: Segment net sales increased 5.9% to $242 million, primarily due to improvements in Global Markets Group. Organic sales increased 4.7%, with volumes up 4.2%. Organic sales growth was mainly driven by VITAFUSION, STERIMAR, FEMFRESH, NAIR and OXICLEAN in the Global Markets group.

Specialty Products: Segment sales increased 12% to $85 million. Organic sales increased mainly due to favorable prices and volumes. Sales of dairy and non-dairy products increased during the quarter.

Other updates

Church & Dwight reported free cash of $240.6 million and total debt of $2.56 billion as of December 31, 2021. For 2021, cash provided by operating activities was $993.8 million of dollars. Capital expenditures were $118.8 million in 2021.

The company announced a 4% increase in its quarterly report dividend from 25.25 cents to 26.25 per share. The revised quarterly dividend will be paid on March 1, 2022 to shareholders of record on February 15, 2022. This is the company’s 26th consecutive year of a dividend increase. Currently, management has nearly 242 million shares outstanding under its buyback plan.

View 2022

Church & Dwight is on track to embark on impressive product launches in 2022. In the Health and Wellness category, the VITAFUSION brand has rolled out BI-LAYER 2-in-1 GUMMIES and a range of Ashwaganda gummies. The ZICAM brand is rolling out the first immune supplement gummies with zinc + vitamins C&D. In the Specialty Haircare category, the BATISTE brand is launching a Leave-in Hair Mask. The company’s personal care portfolio will add SPINBRUSH CLEAR AND CLEAN TM.

Management expects reported 2022 sales growth in the range of 5-8% year-over-year, while organic sales are expected to increase 3-6%. The company expects various categories to remain at high consumption levels like laundry detergent, gummy vitamins, laundry additives, hair growth supplements and cat litter in 2022.

The company expects additional cost inflation to the tune of $155 million from the 2021 level. That said, it is on track to offset price inflation. However, management expects to face inflation at a higher rate than actual price increases in 2022.

For 2022, the operating margin is expected to increase by 60 to 70 basis points compared to the adjusted operating margin published a year ago. Gross margin is expected to be down from the 2021 level. Management expects earnings per share (EPS) of between $3.14 and $3.26, up 4-8% from adjusted EPS. ‘last year. The measure is expected to be driven by operating profit growth offset by a significant increase in the effective tax rate.

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First quarter outlook

For the first quarter of 2022, the company expects reported sales to increase 3-4% and organic sales are expected to increase 1-2%. EPS is expected to be 75 cents in the quarter, suggesting a decline of 9.6% from the adjusted figure for the prior year quarter.

Over the past three months, shares of this company Zacks Rank #3 (Hold) are up 15.7% from the industry7% growth.

Hot Basic Consumer Bets

Some higher ranked stocks are Medifast, Inc. MED, United Natural Foods UNFI and flower food FLO.

United Natural Foods, the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada, boasts a Zacks #1 (Strong Buy) rating. Shares of UNFI are down 15.3% over the past three months. You can see the full list of today’s Zacks #1 Rank stocks here.

Zacks’ consensus estimate for United Natural Foods’ current year EPS and sales suggest growth of 8.8% and 5.1%, respectively, from the figure reported a year ago. UNFI has a surprise on earnings for the last four quarters of 35.4% on average.

Medifast, the manufacturer and marketer of weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). Medifast shares are down 4.5% in the past three months.

Zacks’ consensus estimate for Medifast’s current-year sales and EPS suggests growth of about 63% and 49.3%, respectively, from the figure reported a year ago. MED has a surprise on earnings for the last four quarters of 17.3% on average.

Flower Foods, the U.S. packaged bakery foods producer, currently holds a No. 2 Zacks rank. FLO shares have gained 13% in the past three months.

Zacks consensus estimate for Flower Foods sales in 2022 suggests growth of 1.9% from the figure published a year ago. FLO has a surprise on earnings for the last four quarters of 15.4% on average.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Jerry B. Hatch