Church & Dwight Co. Inc. (CHD, Financial), the American household products manufacturer headquartered in New Jersey, published its financial results for the fourth quarter and full-year 2016 on Feb. 7.
During the fourth quarter, the company reported EPS of 44 cents, a 7% increase on a year-over-year basis, and beat expectations by two cents, generating a positive surprise of 4.80%.
Source: Yahoo Finance
The company reported revenue of $896 million for the quarter, a 2.6% increase on a year over basis, and beat expectations by $6.77 million.
The company reported organic sales growth of 2.7%. The year-over-year increase was led by 3.2% growth in sales volume.
Consumer domestic sales grew 3.4% to $695.4 million, driven by a 4.4% increase in personal care products, compared to the same quarter the previous year. Household products sales also increased, but at a slower pace. It grew 2.8% on a year-over-year basis.
Internationally, the consumer products segment increased 2.1% to $127.6 million from the comparable period of 2015.
The company reported a 4.3% decline in net sales of specialty products to $73 million.
The gross margin improved 60 basis points to 46.1%.
The spending, general and administrative expense rate increased 80 basis points to 13.2%. The company attributes the increase to “higher costs associated with acquisitions, incentive compensation and higher R&D spending.”
The adjusted operating margin grew 50 bps to 19.9%.
Results for the whole year are succinctly summarized in the picture below:
Source: Church & Dwight’s News Release
The company also provided guidance on organic sales growth and diluted EPS for 2017. Organic sales growth is expected to be approximately 1% to 2%, while diluted EPS is expected to be 46 cents, up 7% on a year-over-year basis.
For 2017, Church & Dwight expects 3% growth in organic sales, a 60 basis points increase to 46.3% in the adjusted gross margin rate, a 10 basis point increase to 12.7% in SG&A expense rate and a 40 basis points increase to 21.3% in the adjusted operating margin rate.
The company expects adjusted EPS of $1.89 while diluted EPS will range between $1.72 and $1.74.
Church & Dwight pays a dividend of 76 cents through quarterly payments of 19 cents. The company has increased the quarterly dividend for 21 years in a row. The payout ratio is 40% and the dividend yield is 1.6%.
Church & Dwight Co. closed 2016 with $187.8 million in cash on hand and securities that can be readily converted into cash, a 43% decline on a year-over-year basis. Despite this, the company says it “continues to have significant financial flexibility for acquisitions.” The total debt amounted to $1,120.1 million, of which $426.8 million is due within the year.
The company generated $655.3 million from operations in 2016, an 8.1% increase from 2015. The increase was “due to a decrease in working capital and higher cash earnings.”
Church & Dwight closed at $47.27 per share yesterday, up $1.82 per share or 4% from the previous trading day, with 4,338,699 shares traded on the New York Stock Exchange.
The share price yesterday ranged between a low of $46.38 and a high of $47.56, while the 52-week range is between $42.42 and $53.68.
The company has a market capitalization of $12.22 billion and the stock is trading at 5.76 times the book value.
The stock is uptrending with a 7% gain year to date. The beta of 0.34 indicates the stock is less volatile than the market.
The trailing 12-month price-earnings (P/E) ratio is currently 27.6 and the price-sales (P/S) ratio is 3.6.
The company has approximately 258.6 million shares outstanding, of which 257.93 million can be traded on the stock market. It has insider ownership of 0.31% and institutional ownership of 81.80%.
Among the top institutional investors, the Vanguard Group Inc. holds 25,786,274 shares or 9.97%. The holding is valued at $1,235,678,198 as of Sept. 30, 2016.
During the last quarter of 2016, First Eagle Investment (Trades, Portfolio) reduced its position in Church & Dwight by 4%, holding a current volume of 3,600 shares.
Disclosure: I have no position in Church & Dwight Co. Inc.
Start a free 7-day trial of Premium Membership to GuruFocus.
