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Why Church & Dwight Stock Rose 11% Last Month

By Jeremy Bowman – Updated Dec 5, 2018 at 12:02PM

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Shares of the Arm & Hammer parent moved higher on an impressive earnings report.

What happened

Shares of Church & Dwight (CHD 0.39%) were moving higher last month after the household-products maker delivered a solid third-quarter earnings report featuring strong organic sales and raised its full-year guidance. As a result, shares of the maker of Arm & Hammer baking soda products and Trojan condoms gained 11% in November, according to data from S&P Global Market Intelligence

As you can see from the chart below, essentially all of the stock's gains came at the beginning of the month after its earnings report came out.

CHD Chart

CHD data by YCharts

So what 

Shares of Church & Dwight rose 9% on November 1 as the company reported 4.7% organic sales growth, better than many of its peers, which drove total revenue growth of 7.2% to $1.04 billion. That beat estimates at $1.02 billion. 

A selection of Church and Dwight brands

Image source: Church & Dwight.

Gross margin fell 100 basis points to 44.3% due to higher commodities and transportation costs, which led to operating income increasing just 2.8% to $204.2 million. However, the company benefited from a lower tax rate from the Tax Cuts and Jobs Act and adjusted earnings per share increased from $0.49 a year ago to $0.58, topping expectations at $0.54.

CEO Matthew Farrell said, "We were pleased to deliver strong Q3 results, exceeding our outlook of approximately 3% organic sales growth and $0.53 EPS." He noted that the sales grew in 11 of the company's 15 categories and that 7 of its 11 power brands gained market share. It was also the company's second consecutive quarter with sales growth above 5%.

Now what 

Looking ahead, Church & Dwight raised its guidance for the year, calling for organic sales growth of 4%, up from a previous target of 3.5%, and lifted cash from operations guidance from $690 million to $700 million. The company also maintained revenue growth guidance at 9%, and its EPS outlook at $2.27, up 17% from a year ago. For the fourth quarter, it sees organic sales growth of 3% and adjusted EPS increasing 10% to $0.57. 

Shares of Church & Dwight are now up 33% for the year, widely outperforming peers like Procter & Gamble and Colgate Palmolive. That strong performance is a testament to the company's portfolio of brands, smart management, and the advantages of being a smaller company that can continue to gain market share.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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