Church & Dwight Co. (CHD) shares are experiencing a notable uptick on Friday morning following the company’s impressive third-quarter report. The company exceeded expectations, reporting an adjusted earnings per share of 79 cents, surpassing the street's prediction of 68 cents. Additionally, quarterly revenues reached $1.51 billion, outpacing the analyst forecast of $1.495 billion. The growth in net sales is marked by a 3.8% increase overall, with domestic sales improving by 3.3% and international sales expanding significantly by 9.5%. Conversely, the Specialty Products Division (SPD) saw an 8.0% decline.
Organic sales saw a robust 4.3% rise, propelled by strong domestic and international sales. Within the Consumer Domestic market, net sales achieved $1.170 billion, showcasing a 3.3% growth primarily due to increased personal care sales. Consumer International sales climbed to $267.7 million, reflecting a commendable 9.5% growth. However, the SPD segment suffered a reduction in sales, amounting to $72.1 million, an 8.0% drop, attributed to their strategic withdrawal from the Megalac and food safety businesses early in the year.
The adjusted gross margin witnessed a rise of 60 basis points due to improved productivity, enhanced volume and mix, notwithstanding the high manufacturing costs. Matthew Farrell, Chief Executive Officer, emphasized the importance of volume in driving organic growth and expects this trend to persist in Q4. The company ramped up its investment in brand promotion, marked by an 80 basis point increase in marketing as a percentage of sales. This strategic move has been beneficial for consumption and market share expansion.
Global online sales constituted 20.7% of total consumer sales for the quarter, highlighting the increasing importance of digital marketplaces. Farrell noted that strong sales performance, margin growth, and efficient capital management have paved the way for significant cash flow, projecting over $1 billion from operations this year. By the close of Q3, Church & Dwight's cash reserves stood at $752.1 million, with total debt amounting to $2.2 billion.
Looking ahead, Church & Dwight anticipates an 8% increase in 2024 adjusted EPS, revising its earlier forecast which was at the lower end of the 8-9% range. The full-year reported sales growth is expected to be approximately 3.5%, with organic sales growth projected at around 4%. The company is also adjusting its outlook for adjusted gross margin expansion to about 110 basis points in 2024, previously estimated between 100-110 basis points, citing factors such as carryover pricing, better mix, increased volume, and productivity to balance out the higher manufacturing costs.
For the fourth quarter, the expectations are for reported sales to grow between 1.5% and 2.5%, with organic sales growth projected between 2% and 3%. The forecast for reported EPS is set at $0.75, and adjusted EPS at $0.76, which falls short of the consensus estimate of $0.86. Currently, CHD shares have appreciated by 5.59%, trading at $105.50, reflecting positive investor sentiment following the robust quarterly performance.
