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Church & Dwight Co., Inc. CHD reported impressive third-quarter 2024 results, with the top and bottom lines increasing year over year. Quarterly earnings and net sales surpassed the Zacks Consensus Estimate. The results were driven by strong consumer demand across CHD's portfolio, the resilience of its brands, successful new product launches and continued commitment to effective execution.
Quarterly adjusted earnings of 79 cents per share beat the Zacks Consensus Estimate of 68 cents. The bottom line increased 6.8% year over year, buoyed by better-than-expected sales growth and gross margin expansion.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net sales of $1,510.6 million advanced 3.8% year over year and surpassed the Zacks Consensus Estimate of $1,493.8 million. The upside can be attributed to robust consumer demand across its portfolio. Organic sales increased 4.3% due to gains from volume to the tune of 3.1% and the favorable product mix and pricing of 1.2%. We had expected organic sales growth of 2.9% in the quarter. The global online sales accounted for 20.7% of total consumer sales in the third quarter.
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight Co., Inc. Price, Consensus and EPS Surprise
Church & Dwight Co., Inc. price-consensus-eps-surprise-chart | Church & Dwight Co., Inc. Quote
A Closer Look at CHD’s Q3 Results
Church & Dwight’s gross margin expanded 80 basis points (bps) to 45.2%. The adjusted gross margin was 45%, up 60 bps on the back of enhanced productivity as well as gains from favorable volumes and mix.
Marketing expenses increased $18 million year over year to $185.8 million. As a percentage of net sales, the figure increased by 80 bps to 12.3% on persistent investment in brands and new products.
The adjusted SG&A expenses, as a percentage of net sales, increased 20 bps to 15%, due to investments in international operations, research and development, as well as Information technology.
CHD Provides Q3 Insights by Segment
Consumer Domestic: Net sales in the segment increased 3.3% to $1,170.8 million on the back of improved personal care sales growth. Our estimate for segment sales for the quarter was $1,155.8 million. Organic sales increased 3.3%, driven by favorable price and product mix (up 0.7%) and volume (up 2.6%). The uptick was backed by strength in THERABREATH mouthwash, HERO acne products, ZICAM supplements, ARM & HAMMER Scent Boosters and SPINBRUSH toothbrushes. These gains were somewhat offset by softness in the vitamin business and FLAWLESS.
Consumer International: Net sales in the segment increased 9.5% to $267.7 million. Our estimate for segment sales was $264.7 million. Organic sales jumped 8.1%, driven by favorable pricing and a product mix of 2.8% and higher volumes to the tune of 5.3%. Sales growth was fueled by THERABREATH, HERO and OXICLEAN.
Specialty Products: Sales in the segment declined 8% to $72.1 million, including the impact of winding down the Megalac business. Our estimate for segment sales was $71.9 million. Organic sales grew by 7.5%, driven by higher prices and an improved product mix, which contributed 3.9% along with a volume increase of 3.6%.
CHD’s Financial Health Snapshot
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $752.1 million and long-term debt of $2,208.2 million. For nine months ended Sept. 30, 2024, cash from operations totaled $863.9 million.
Capital expenditures were $125.2 million in the same time frame. The company continues to expect about $180 million in capital expenditures for 2024. It anticipates capital expenditures to return to nearly 2% of sales in 2025. For 2024, Church & Dwight expects cash flow from operations of nearly $1.1 billion, up from the prior forecast of $1.08 billion.
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What to Expect From CHD in 2024?
While there was a slight improvement in the U.S. consumption within the company’s categories in September and October, it remains cautious about the U.S. consumer and category growth rates for the fourth quarter. The company continues to project reported sales growth of nearly 3.5% and organic sales growth of around 4% for 2024.
Management is raising its full-year adjusted gross margin expansion guidance to roughly 110 bps compared to 2023, up from the previous range of 100-110 bps expansion. The company anticipates carryover pricing, a better product mix, increased volume and enhanced productivity to offset rising manufacturing costs.
The company will maintain its brand investments to support innovation to fuel consumption and market share growth as they approach 2025, now anticipating marketing expenses as a percentage of sales to exceed 11%.
CHD now expects a 2024 reported earnings per share (EPS) decline of nearly 23% thanks to an asset impairment charge, while adjusted EPS growth is projected to be around 8%. The anticipated tax rate is roughly 22.5%.
Church & Dwight’s Q4 Guidance
For the fourth quarter of 2024, the company expects reported sales growth of 1.5-2.5% and organic sales growth of 2-3%. Church & Dwight expects a reported EPS of 75 cents. The company expects adjusted EPS of 76 cents per share, representing a 17% increase year over year.
The company’s shares have increased 1.4% in the past three months against the industry’s 2.4% decline.
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