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International Unit Helps Church & Dwight Reach 52-Week High

Zacks

Shares of Church & Dwight Co., Inc. CHD touched a 52-week high of $58.94, before closing the session a tad lower at $58.69 on Sep 7. Notably, the company has been gaining from focus on robust international business, acquisitions and innovations. Also, it has been witnessing organic sales growth for some time. All these factors have helped this soap and cleaning material company to gain investors’ optimism and retain foothold in the markets.

Notably, this Zacks Rank #3 (Hold) stock has rallied 20.2% compared with the industry’s and S&P 500 index’s rise of 3.8% and 3.2%, respectively, in the past three months. In fact, the aforementioned factors have also helped the company deliver impressive second-quarter 2018 results, which encouraged management to raise outlook. Markedly, the stock has gained 3.3% since the announcement of the results. (Read: Church & Dwight Updates View on Robust Q2 Earnings)



Let’s discuss.

Consumer International Business: Primary Driver

The consumer international business has been contributing to organic sales growth for long. In the second quarter, organic sales in the international segment rose 6.8%, courtesy of higher volumes. Overall consumer international sales were also strong, rallying 21.4% on the back of recent acquisitions, broad-based sales growth for household and personal care products as well as improvements in export business. The company continues to invest in the segment to sustain strong sales growth.

Strategic Acquisition: Key Catalyst

The company started with only one brand, i.e. ARM & HAMMER and since then it has acquired a number of brands which are generally number-one or number-two brands with high margins. These businesses boosted the revenues from 2004 level of $1.5 billion. Revenues are expected to reach $4 billion in 2018. Further, the acquisition of Waterpik contributed significantly to revenues in the second quarter. Also, management expects sales from Waterpik to increase in high single digits in 2018. Other acquisitions include Agro BioSciences in May 2017 and VIVISCAL business in January 2017.

Organic Sales: On Track

Church & Dwight has been witnessing sturdy growth in organic sales, courtesy of solid focus on product innovations. Evidently, organic sales grew 4.4% in the second quarter, following a 3.8% rise in the first quarter. Organic sales are now expected to rise 3.5% in 2018, up from the previous projection of more than 3% growth.

Bottom Line

Although Church & Dwight has been struggling with strained margins for quite some time, we expect ongoing strategies and strong fundamentals to offset these woes and boost performance. This is also reflected in management’s raised outlook for 2018. Evidently, Church & Dwight expects 2018 reported sales growth to surpass the earlier projection of 9%. Earnings are expected between $2.26 and $2.28 per share compared with the previous guidance of $2.24 and $2.28.

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