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Church & Dwight (CHD) Up 20% in 3 Months: More Room to Run?

Church & Dwight Co., Inc.CHD is gaining momentum backed by its focus on robust international business, acquisitions and innovations. Also, the company has been witnessing organic sales growth for some time now. All these factors have helped this soap and cleaning material company to win investors' confidence and retain its sturdy surprise record. In the past three months, shares of this Zacks Rank #3 (Hold) company have advanced 20.1%, outperforming the industry 's 6.6% growth. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Let's Take a Closer Look

Church & Dwight's consumer international business has been contributing to its organic sales growth. In second-quarter 2018, organic sales in the international segment jumped 6.8%. As this unit remains a bright spot for the company, it continues investing in this area to sustain strong sales growth.

Strategic acquisitions have been another key catalyst behind the company's revenue growth. Notably, the Waterpik buyout contributed significantly toward sales growth in the second quarter. Management also expects sales from Waterpik to increase in high-single digits in the current year. Church & Dwight's other acquisitions include Agro BioSciences in May 2017 and VIVISCAL business in January 2017.

To top these, Church & Dwight has been witnessing sturdy growth in organic sales backed by solid focus on product innovations. Evidently, organic sales grew 4.4% in the second quarter of 2018, following a 3.8% rise in the first quarter. Organic sales are now anticipated to rise 3.5% in 2018 compared with more than 3% growth expected earlier.

Further, for 2018, management expects improved market share and volume growth to boost results. Moreover, the company's global consumer online sales continued to improve and is expected to represent more than 6% of its sales in 2018.

However, Church & Dwight is facing intense competition from other players in the consumer products industry on the basis of pricing, promotional activities and new product introductions. Also, the company's soft organic sales at its Specialty Products unit may hamper its market share, and in turn hurt its performances.

Moreover, the company's gross margin has been declining year over year for a while now. In second-quarter 2018, the metric contracted 140 basis points (bps) on increased commodity and transportation expenses. For 2018, the company expects gross margin to decrease 120 bps due to hurdles related to the oral care products and increased logistic expenses.

Nevertheless, we expect the company's robust business expansion endeavors to aid offsetting the aforementioned hiccups and thereby sustain on growth track. As a result, the company raised its outlook and now expects 2018 reported sales growth to surpass the earlier projection of 9%. Earnings per share are now expected to be between $2.26 and $2.28 compared with $2.24 and $2.28 anticipated earlier. Backed by such upsides, we expect the company to continue to be in investors good books.

Three More Hot Stocks Awaiting Your Look

MEDIFAST INC MED delivered an average positive earnings surprise of 16.6% in the trailing four quarters. It has a long-term earnings growth rate of 20% and a Zacks Rank #1.

Ollie's Bargain Outlet Holdings, Inc. OLLI has a long-term earnings growth rate of 23% and a Zacks Rank #2 (Buy).

Helen of Troy Limited HELE pulled off an average positive earnings surprise of 21.6% in the trailing four quarters. It has a long-term earnings growth rate of 6.1% and a Zacks Rank of 2.

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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.


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

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