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A month has gone by since the last earnings report for Church & Dwight (CHD). Shares have added about 5.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Church & Dwight due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Church & Dwight Q2 Earnings & Sales Beat Estimates
Church & Dwight reported robust second-quarter 2020 results, with the top and bottom lines improving year over year. Also, sales and earnings grew year over year. Results gained from the robust household and personal care businesses on consumers’ shifted preference for essential products amid the coronavirus outbreak. Moreover, management is encouraged with its results so far in 2020. Incidentally, the company is raising its sales and earnings guidance for 2020.
Church & Dwight posted adjusted earnings of 77 cents per share that surpassed the Zacks Consensus Estimate of 63 cents and improved 35.1% from the year-ago quarter’s level.
Net sales of $1,194.3 million advanced 10.6% year over year. Moreover, the top line surpassed the Zacks Consensus Estimate of $1,150.8 million. Results were backed by solid demand for various products stemming from the coronavirus outbreak.
Organic sales rose 8.4% on the back of increased consumption, reduced couponing and retail inventory restocking. The uptick was fueled by a positive product mix and pricing, and a rise in volumes of 3.5% and 4.9%, respectively.
Gross margin expanded 220 basis points (bps) to 46.8% on improved pricing, lower promotional costs and couponing. Also, enhanced productivity was a reason. These were somewhat offset by increased manufacturing expenses, costs related to the COVID-19 outbreak and currency headwinds. Also, marketing expenses fell 5.3% to $122.3 million. As a percentage of sales, it contracted 180 bps to 10.2%.SG&A expenses increased 13.1% to $186.6 million. As a percentage of sales, SG&A expenses increased 30 bps to 15.6%.
Segment Details
Consumer Domestic: Net sales of the segment rose 13.6% to $931.1 million due to higher household and personal care sales along with gains from acquisitions. Organic sales improved 10.7%, driven by a positive impact of 4.4% from price and product mix as well as 6.3% from higher volumes. The primary growth drivers in the segment were VITAFUSION and L’IL CRITTERS gummy vitamins, ARM & HAMMER liquid laundry detergent, OXICLEAN stain fighters, ARM & HAMMER laundry detergent scent boosters, FLAWLESS women’s hair removal, ARM & HAMMER clumping cat litter, and baking soda.
Consumer International: Net sales of the segment inched up 0.5% to $187.5 million. Organic sales improved 0.6% on favorable price and product mix of 1.3%. However, volumes edged down 0.7%. Organic sales gained from the strength in Global Markets Group, which was somewhat offset by a decline in Mexico and Europe.
Specialty Products: Sales in the segment increased 3% to $75.7 million. Also, organic sales advanced 3% owing to higher volumes of 3.3%, while unfavorable pricing of 0.3% was a drag. Further, management stated that demand for dairy products is anticipated to improve during the second half of the year. Also, demand for prebiotic and probiotic products remained strong.