If there's a way to keep setting new stock highs every year
without much fanfare,Church & Dwight (
) has figured out how to do it.
Church & Dwight makes and sells a range of consumer
products under different brand names.
Its lineup includes everything from Arm & Hammer baking
soda and Oxiclean stain remover to First Response pregnancy
tests, Trojan condoms and Orange Glo floor cleaners.
Most of the goods are value priced, though Church & Dwight
also offers a few premium brands.
The popularity of Church & Dwight's products have helped
it build a record of steady sales and earnings gains through the
years, no matter the economy.
The company even grew sales and earnings in both 2009 and
2010, when consumers were spooked silly by the Great Recession
and financial crisis.
While many consumers are aware of Church & Dwight's
brands, they probably have never heard of the company itself.
About the only place it does get much notice is on Wall Street,
where it has established a reputation for strong dividends and
Since 2001, the company's stock price has increased every year
except 2005, when it basically moved sideways. Shares continue to
rise this year, reaching a record high of 60.49 on Tuesday.
"Church & Dwight has one of the most interesting stories
(in the consumer products sector), and one of the highest
valuations as a result," noted Leigh Ferst, analyst at Wellington
"Robust Cash Flow"
She says that valuation is "deserved" because of Church &
Dwight's "consistent double-digit earnings, robust cash flow and
a well-balanced strategy to go for value shoppers without
ignoring opportunities for premium positioning in some of its
Church & Dwight operates in three segments: Consumer
Domestic, Consumer International and Specialty Products Division
The Consumer Domestic unit provides the lion's share of
revenue. It offers household products such as laundry detergent,
fabric softener and cat litter as well as personal care products
like toothpaste, toothbrushes, deodorants and home pregnancy test
The Consumer International segment sells much the same stuff,
only to international markets such as Canada, France, Australia,
the U.K., Mexico, Brazil and China. International sales accounted
for 17% of the total last quarter.
The SPD segment offers specialty chemicals, such as sodium
bicarbonate and potassium carbonate, animal nutrition products
such as feed-grade sodium bicarbonate, and specialty cleaners for
various industrial, institutional, medical and food
Church & Dwight's biggest customer isWal-Mart (
), which accounts for more than 20% of overall sales.
The company's main competitor isClorox (
), the maker of well-known brands including its namesake Clorox
bleach as well as Pine-Sol cleaners, Brita water filters and
Hidden Valley salad dressings.
Church & Dwight also competes in various product lines
against a number of other firms, from consumer product
behemothsProctor & Gamble (
) andColgate-Palmolive (
) to smallish specialty cleaner makers such asZep (ZEP).
Of those companies, Church & Dwight is the only one to
grow annual sales and earnings every year for the past
Last year, it logged revenue of $2.9 billion, up 6% from the
prior year. Earnings gained 12% to $2.48 a share .
Fourth-quarter profit came in at 57 cents a share, up 30% from
the prior year and above Wall Street estimates. Overall sales
gained 11% to $809.7 million, while organic sales climbed
"Organic sales growth for the domestic unit was better than
anticipated, and reported gross margin was 10 basis points ahead
of our forecast," JPMorgan analyst John Faucher said in a Q4
Consumer Domestic net sales were $609.4 million for the
quarter, up 17% from the prior year. That gain made up for a 6%
decline in Consumer International sales and a 3.8% dip in
Specialty Products sales.
On Jan. 30, the company's board of directors declared a 17%
increase in the regular quarterly dividend from 24 cents to 28
cents, equivalent to an annual dividend of $1.12.
Meanwhile, Church & Dwight's gross margin expanded 210
basis points during the fourth quarter, excluding the impact of
its $650 million buyout of Avid Health, a maker of gummy vitamins
The Avid Health deal was announced in August and closed in
early October. The acquisition brought aboard Vitafusion, the No.
1 brand in adult gummy-form vitamins, and Li'l Critters, the top
brand in children's gummy-form vitamins.
Avid's net sales for the trailing 12 months through June 30
were around $230 million.
"The potential to sustain Avid's high growth is good because
of market growth and a successful entry into the large category
for adult vitamins," analyst Ferst noted. "Also, the company's
sales force can move Avid into the large food and drug store
Church & Dwight said the Avid acquisition will be
accretive to earnings this year and should boost the bottom line
by 4% to 6%.
The extra cash flow will help Church & Dwight finance
certain growth initiatives, analysts say.
"They are guiding for higher marketing spending in 2013,"
JPMorgan's Faucher said. "We believe the accretion from Avid
should provide room for extra investment, which they have
sacrificed in recent periods."
Analysts polled by Thomson Reuters expect Church & Dwight
to grow EPS 13% this year and 11% in 2014.