Consumer products company Chattem
Earnings doubled in the quarter to $4.9 million, but that still missed expectations because of new product reserves and stock-option expenses. Revenues inched up 2%, which also undershot analyst forecasts. Equally burdensome was the stock-option expense, which knocked 20% off of net income. That gave investors a headache, and the stock plummeted by more than $6 per share.
Chattem markets a slew of popular consumer products -- everything from Gold Bond medicated powder to Bull Frog sunblock. It doesn't make these products itself; instead, Chattem acquires them from other companies and continues marketing them. These products tend to be some of the top sellers in each category.
That's where the soothing power of the earnings report kicked in. While it had to set aside larger amounts of reserves for its new Icy-Hot product launch, the company also reported that the acquisition of five new products from Johnson & Johnson
Chattem was also finally able to put to rest the long-running litigation it has has had over Dexatrim diet pills. While Dexatrim's use of phenylpropanolamine, or PPA, has long been settled, Chattem was able to at last recover nearly $20 million from the $56 million settlement.
So do we side with those cramping over results and take Pamprin, or do we flex our muscles with the Flexall crowd and look at how the product lineup will boost sales further?
I side with the more limber group. Chattem has the leading consumer products, and revenues on the year rose nearly 8% to more than $300.5 million. It's acquired a passel of products that should also outperform the competition and add significantly to both top- and bottom-line growth. With revenues forecast to grow some 37% and earnings up as much as 56% in 2007, I'd say some Benzodent would cure any denture pain from chewing on this report too much.
Johnson & Johnson is a recommendation of Motley Fool Income Investor. Pfizer is a recommendation of Motley Fool Inside Value. Try out these or any of our other Foolish newsletters for yourself, free for 30 days.