Church & Dwight Q1 Earnings Beat Estimates, Lower Organic Sales Hurt

Church & Dwight Co., Inc. CHD reported mixed first-quarter 2025 results, as the bottom line beat the Zacks Consensus Estimate while the top line missed. Both metrics fell year over year. A tough operating landscape, including slowing consumption and other headwinds, hurt the quarterly performance.Quarterly adjusted earnings per share (EPS) of 91 cents beat the Zacks Consensus Estimate of 89 cents and the company’s guidance of 90 cents. However, the bottom line slipped 5.2% year over year.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.CHD’s shares fell 5.7% on soft quarterly results as well as slashed organic sales, adjusted gross margin and adjusted EPS growth outlook for 2025. The company’s shares have lost 6.4% in the past three months against the industry’s 0.1% growth.A Closer Look at CHD’s Q1 ResultsNet sales of $1,467.1 million fell 2.4% year over year and missed the Zacks Consensus Estimate of $1,511 million. This lagged the company’s guidance of a nearly 1% increase. It witnessed slow category growth in the U.S. market and retailers lowered the inventory levels. However, the company’s brands witnessed increased consumption and share in the reported quarter.Organic sales dropped 1.2% owing to a 1.4% drop in volumes, somewhat offset by a pricing and mix rise of 0.2%. We had expected organic sales growth of 1.9% in the quarter.Momentum with the e-commerce unit continued in the first quarter, with global online sales accounting for 22.9% of the total consumer sales in the quarter.Church & Dwight Co., Inc. Price, Consensus and EPS Surprise Church & Dwight Co., Inc. price-consensus-eps-surprise-chart | Church & Dwight Co., Inc. QuoteChurch & Dwight’s gross margin contracted 70 basis points (bps) to 45%. The adjusted gross margin was 45.1%, down 60 bps year over year, due to higher manufacturing costs and lower volume, somewhat offset by enhanced productivity, positive mix and revenues from high-margin acquisitions.Marketing expenses declined $15.4 million year over year to $136.6 million. Adjusted selling, general, and administrative (SG&A) expenses, as a percentage of net sales, increased 40 bps to 15.2%.CHD Provides Insights by SegmentConsumer Domestic: Net sales in the segment dipped 3% to $1,129.8 million, due to soft household and personal care sales. Organic sales fell 3% due to a volume drop of 3.1%, somewhat offset by a price and product mix rise of 0.1%. Our estimate for the segment’s organic sales growth for the quarter was 1.5%. The company saw strength in THERABREATH mouthwash and ZICAM, offset by softness in the vitamin business, OXICLEAN stain fighters and ARM & HAMMER cat litter. The segment was broadly impacted by retailer inventory efforts.Consumer International: Net sales in the segment jumped 2.7% to $261.9 million. Organic sales climbed 5.8% compared with our expectation of a 3% rise. This was driven by volume growth of 5.9%, somewhat offset by adverse price and product mix to the tune of 0.1%. Sales growth was fueled by THERABREATH, HERO and WATERPIK, as well as broad-based growth in all the subsidiary markets.Specialty Products: Sales in the segment declined 9.3% to $75.4 million, including the impact of exiting the Megalac and food safety business. Organic sales grew 3.2%, driven by a price and product mix rise of 2.9% and a volume jump of 0.3%. Our model anticipated the segment’s organic sales growth to be 4%.CHD’s Financial Health & Other DetailsThis Zacks Rank #4 (Sell) company ended the quarter with cash and cash equivalents of $1,074.5 million and long-term debt of $2,205.2 million. For first-quarter 2025, cash from operations totaled $185.7 million. Capital expenditures were $16.5 million in the same time frame.The company paid dividends of $72.4 million during first-quarter 2025. CHD expects about $130 million in capital expenditures for 2025. Church & Dwight expects cash flow from operations of $1.05 billion compared with $1.156 billion expected earlier. It continues to pursue accretive acquisitions, resonating well with its criteria, putting an emphasis on fast-moving consumable products.The company has been reviewing and making strategic efforts for the Flawless, Spinbrush and Waterpik showerhead businesses, which consist of the shutting down or selling of such businesses. Such businesses deliver roughly $150 million of net sales with below-average profitability. This move looks forward to reinforcing the company, increasing focus on core brands and mitigating a major portion of the tariff exposure. It expects to record a Q2 charge of nearly $60-80 million, mainly including non-cash impairments of intangibles and fixed assets, and inventory charges depending on sell-through.The tariff situation is fluid, therefore, CHD now estimates a 12-month run-rate gross tariff exposure of about $190 million. The impact of the portfolio decisions and supply-chain actions is likely to lower tariff exposure by nearly 80%. The supply-chain efforts now do not include sourcing Waterpik flossers from China for the U.S. market. The effect of inventory builds and other supply-chain moves enables CHD to effectively handle tariff exposure and the net impact is included in tits guidance. In the coming 12 months, the impact of the balance tariffs can be mitigated via supply-chain actions and surgical pricing.What to Expect From CHD?Despite the uncertain markets, management is focused on growing the market share across the company’s portfolio. CHD has been investing in marketing to aid brands and the consumption of its brands is expected to outperform the category growth, backed by innovation. For 2025, management expects product launches to continue bolster growth and market share. The outlook is based on solid underlying operating fundamentals.For 2025, the company now projects organic sales growth of around 0-2% compared with 3-4% guided previously. The sales view reflects no recovery in retailer destocking from the reported quarter and slow category growth due to macroeconomic volatility. The deceleration of category growth in CHD’s largest categories in the US shows the tentativeness of the U.S. consumer. It experienced 2.5% category growth in fourth-quarter 2024, 1.5% in the first quarter and adverse year-over-year category consumption in April. Church & Dwight continues to forecast gaining market share.For 2025, management estimates adjusted gross margin to contract 60 bps year over year against an expansion of about 25 bps expected earlier. CHD projects tariff impacts, higher input costs and adverse mix to mitigate incremental productivity. Marketing, as a percentage of sales, is likely to be roughly 11% of sales, thanks to constant investments in brands and innovation.For 2025, CHD continues to anticipate SG&A, as a percentage of sales, to be lower than 2024. The company expects to make investments, particularly in ecommerce and International. It expects other expense to be nearly $50 million. The tax rate is likely to be 23%. Hence, management now predicts adjusted EPS growth of 0-2% compared with 7-8% guided earlier, owing to soft sales assuming no recovery in retailer destocking from Q1, sluggish category growth for the rest of the year and tariff woes.For the second quarter, CHD predicts organic sales to decrease 2% to be flat year over year. Hence, adjusted EPS is envisioned to be 85 cents, a decline of 9% from the year-ago quarter.  Church & Dwight expects EPS growth to be weighted in the back half of 2025, owing to marketing and investment timing compared with the prior year. The company’s adjusted outlook does not include as of April 1, 2025 charges and the persistent results for the Flawless, Spinbrush and Waterpik showerhead businesses.Stocks to Consider in the Consumer Staples SpaceNomad Foods NOMD, which manufactures frozen foods, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.NOMD delivered a trailing four-quarter earnings surprise of 5%, on average. The Zacks Consensus Estimate for Nomad Foods’ current financial-year EPS indicates growth of 3.1% from the year-ago number.United Natural Foods UNFI, which is a distributor of natural, organic and specialty food in the United States, currently carries a Zacks Rank #2 (Buy). UNFI delivered a trailing four-quarter earnings surprise of 408.7%, on average. The Zacks Consensus Estimate for UNFI’s current financial-year sales and EPS indicates growth of 1.9% and 485.7%, respectively, from the year-ago numbers.Utz Brands UTZ manufactures salty snacks under popular brands and has a Zacks Rank of 2 at present. UTZ delivered a trailing four-quarter average earnings surprise of 8.8%.The Zacks Consensus Estimate for UTZ’s current financial-year sales and EPS implies growth of 1.2% and 10.4%, respectively, from the year-ago numbers.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Church & Dwight Co., Inc. (CHD): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report Nomad Foods Limited (NOMD): Free Stock Analysis Report Utz Brands, Inc. (UTZ): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks