Church & Dwight (NYSE: CHD) reported Q4 EPS of $0.58, $0.03 better than the analyst estimate of $0.55. Revenue for the quarter came in at $1.14 billion versus the consensus estimate of $1.14 billion.

2019 Fourth Quarter Results

• Sales growth +6.5%; Domestic +6.3%, Int’l +10.1%
• Organic sales +4.4%: Domestic +3.5%, Int’l +10.6%
• Gross Margin +170 bps. to 45.8%
• EPS growth +1.8%; Adjusted -3.5%

Matthew Farrell, Chief Executive Officer, commented, “Q4 was another outstanding quarter for Church & Dwight. Q4 sales growth of 6.5% and organic sales growth of 4.4% were exceptionally strong and exceeded our outlook. Consumer Domestic volume turned positive in Q4, a very encouraging sign after early 2019 price increases had slowed volume gains. Our categories continue to grow, and our market shares are healthy. In the domestic business, 10 out of 12 power brands met or exceeded category growth in full year 2019. The Consumer Domestic business was exceptionally strong posting both positive volume and price/mix growth in Q4. The International business continues to deliver stellar results with reported sales growth of 10.1%. Our strong earnings enabled us to make investments in Q4 to continue our momentum into 2020.”

“Looking ahead, we have compelling new product launches in 2020, including a new ARM & HAMMER® laundry detergent called CLEAN & SIMPLE™ with only 6 ingredients plus water. We expect this launch to drive volume and organic sales growth. The investments in our International business continue to pay off, particularly in our Global Markets Group and our Asia Pacific partnerships and we anticipate another strong year in 2020. Our SPD business hit an inflection point in Q4 with positive organic growth driven by the recovery of milk prices. We are expecting high growth in 2020 from our recent acquisitions. WATERPIK® just completed a strong year of organic growth with record earnings. We expect WATERPIK to deliver high single digit sales growth in 2020. FLAWLESS® (proforma as if we had owned it for the last 12 months) had full year sales of $186 million (slightly lower than our proforma $191 million outlook) and has an exciting pipeline of new products and distribution opportunities both domestically and internationally. We expect approximately 15% sales growth from FLAWLESS in 2020. Our categories are strong, our businesses are performing well, and we are entering 2020 with momentum.”

GUIDANCE:

Church & Dwight sees Q1 2020 EPS of $0.73, versus the consensus of $0.76.

Church & Dwight sees FY2020 EPS of $2.64-$2.69, versus the consensus of $2.69.

Outlook for 2020

Mr. Farrell stated, “We expect 2020 to be another strong year with adjusted EPS of $2.64 to $2.69, an increase of 7-9%, driven by operating income growth.¹ This reflects continued strong business performance in-line with our Evergreen model.”

Mr. Farrell continued, “We expect full year 2020 reported sales growth to be approximately 6.5% and organic sales growth to be approximately 3.5%, reflecting strength in all three of our businesses with exciting new product introductions.3 Our strong 4% second-half 2019 organic sales run rate is expected to improve 50 basis points due to the growth of the FLAWLESS brand, offset by a 100 basis point reduction of organic sales as we continue to reduce promotions on OXICLEAN laundry and begin to exit our low margin private label vitamin business.

“We expect full year reported gross margin to be up 10 basis points, but up 50 basis points when excluding the impact of acquisition accounting. We expect full year marketing spending to increase 10 basis points as we invest in our ARM & HAMMER “More Power to You”™ campaign and our ARM & HAMMER CLEAN & SIMPLE detergent launch. We expect to leverage SG&A 10 basis points. We expect adjusted operating profit margin expansion to be in-line with our Evergreen model of +50 basis points, excluding the impact of acquisition accounting driven by gross margin expansion and SG&A leverage. The 2020 effective tax rate is expected to be approximately 21%, including a one-time international tax benefit. Cash flow from operations is expected to be approximately $890 million. We continue to aggressively pursue accretive acquisitions that meet our strict criteria.

“For Q1, we expect reported sales growth of approximately 6.5%, organic sales growth of approximately 3.0%, gross margin expansion, and adjusted EPS to be $0.73 per share, a 4% increase over last year’s Q1 EPS, which excludes the earn-out adjustment from our acquisition of the FLAWLESS business¹. Our Q1 EPS outlook includes higher marketing versus year ago to support our new product launches.”

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