Church & Dwight Co., Inc. Q3 2024 Earnings Review

Overview
Church & Dwight Co., Inc. (NYSE: CHD) had a solid third quarter in 2024, achieving a 3.8% increase in reported sales, exceeding the expected 2.5% growth. CEO Matt Farrell announced organic sales rose by 4.3%, propelled by increased volumes and new product launches. Adjusted earnings per share (EPS) were reported at $0.79, outperforming the forecast of $0.67.

Despite challenges in the gummy vitamin segment, resulting in a $357 million asset write-down, the company saw growth in international sales and specialty products. While cautious about consumer trends in the fourth quarter, Church & Dwight anticipates a full-year organic revenue growth of 4% and adjusted EPS growth of about 8%.

Key Takeaways

• Reported sales increased by 3.8% with organic sales up 4.3%.
• Adjusted EPS was $0.79, outperforming expectations of $0.67.
• Domestic, international, and specialty products contributed to overall growth.
• The gummy vitamins segment faced a $357 million write-down.
• Gross margin improved, impacted by higher manufacturing costs.
• Increased marketing expenses by $18 million, making it 12.3% of net sales.
• Management is cautious regarding fourth-quarter trends but optimistic about long-term growth.

Company Outlook

• Projected 4% organic revenue growth and 3.5% reported sales growth for the full year.
• Expected adjusted EPS growth of approximately 8%.
• Anticipated adjusted gross margin expansion of around 110 basis points.
• Marketing expenditure as a percentage of sales expected to surpass 11%.
• Plans to invest in marketing and SG&A to drive momentum into 2025.

Challenges and Opportunities

Bearish Highlights

• Underperformance in the gummy vitamins segment resulted in a significant asset write-down.
• Caution expressed by management regarding fourth-quarter consumer trends.
• Higher manufacturing costs negatively impacted gross margins.

Bullish Highlights

• Growth in international sales and specialty offerings.
• Strong performance of ARM & HAMMER products, including new launches.
• Improved effective tax rate, projected at 22.5% for the full year.
• Cash from operating activities reached $864 million in the first nine months.

Earnings Call Transcript Highlights

Management emphasized a strong third quarter with notable growth across various segments. Innovations in laundry products and the expansion of international markets significantly contributed to sales performance. Despite facing challenges in the gummy vitamin category, they are optimistic about new product launches and increased marketing efforts.

Investing Pro Insights

Church & Dwight's third-quarter results align with a broader growth trend, evidenced by a 6.41% annual revenue increase. The company has sustained dividend growth for 50 consecutive years, reflecting a commitment to shareholder value.

The company operates with moderate debt levels and maintains ample liquid assets, aiding flexibility during market uncertainties. Analyzing the P/E ratio of 31.84 suggests the stock may be undervalued relative to future growth potential, backed by management's long-term positive outlook.

Conclusion

Church & Dwight Co., Inc. continues on a path of growth despite setbacks, with plans to enhance marketing investments and innovation to sustain long-term profitability while navigating market challenges.