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4 Factors That Make Church & Dwight (CHD) a Lucrative Bet Now


Church & Dwight Co., Inc.’s CHD stock has been moving up the charts, thanks to its focus on innovations which have also helped the company to put up an impressive past record. Well, this consumer products behemoth has gained 6.8% in the past three months, as against the industry’s dip of 0.3%. So, let’s take a closer view of the factors that have spurred investors’ confidence in this Zacks Rank #2 (Buy) stock, which is most likely to keep its spectacular show on.

Focus on Innovations, Solid Brand Portfolio

This developer, manufacturer and marketer of a broad range of household, personal care and specialty products has a diversified portfolio with 11 power brands, including ARM & HAMMER, Trojan, OxiClean, Spinbrush, First Response, Nair, Orajel, Xtra, VMS, Water Pik and Batiste. The company’s regular innovation helps in improving brand positions and market share in the consumer categories. Thus, management remains committed toward innovations in particular, as it believes that remains the biggest driver for its top and bottom-line growth in future.

Robust Acquisitions Bolster Growth

Church & Dwight, which started with only one brand (ARM & HAMMER) has acquired a number of superior brands with high margin over time. These asset-light businesses boosted the company’s revenues from $1.5 billion in 2004 to $3.5 billion in 2016. Progressing on these lines, Church & Dwight concluded the buyout of Waterpik in the third quarter of 2017 and is on track with its integration. The company's other recent acquisitions include Agro BioSciences in May and VIVISCAL business in January 2017. Prior to that, the acquisitions of ANUSOL and RECTINOL brands from Johnson & Johnson in December 2016 provided impetus to the company’s international business. Talking of international, let’s analyse the company’s Consumer International segment that remains its major growth driver.

Consumer International Segment: A Major Driver

Church & Dwight’s Consumer International business has been doing exceptionally well. Evidently, consistent strength at this segment has been driving the company’s overall organic sales growth for more than a year now. In the third quarter, organic sales in the consumer international segment jumped 6.2% thanks to higher volumes. Also, overall consumer international sales surged 21.7% on the back of extensive sales of household and personal care items. Incidentally, sales at this segment received considerable impetus from FEMFRESH, OXICLEAN and STERIMAR in the export business, STERIMAR and ARM & HAMMER baking soda in Mexico, FEMFRESH in Australia as well as ARM & HAMMER cat litter and BATISTE in Canada. Further, the company is opening new offices to support increase in export business, and it continues to invest in the consumer international business to sustain its strong sales growth.

Impressive Past Record

Church & Dwight’s third-quarter 2017 results marked the company’s fourth consecutive quarter of positive earnings surprise, whereas sales have outpaced the consensus mark in 12 out of the last 14 quarters now. Results were backed by continued organic sales growth, which in turn was driven by higher volumes. Clearly, the company’s investment spending is paying off. Despite bearing the brunt of hurricanes, Church & Dwight’s organic sales rose 3.2%, backed by growth in domestic sales, continued international business expansion and solid Specialty Products business growth. Management remains impressed with the broad-based growth and it also remains hopeful of achieving bottom-line growth of 8.5% in 2017.

All said, we believe that Church & Dwight’s stable portfolio of value and premium products, launch of innovative products and aggressive productivity programs should keep driving its performance.

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