"Church & Dwight Co. (NYSE: CHD) continues to do well what it has done since 1846: sell baking soda," notes Tracey Ryniec, who has chosen the stock as the latest Zacks Elite Stock of the Day.
The advisor explains, "In these turbulent financial times, investors have been turning to companies with a long track record of selling essential name-brand products and Church & Dwight is one of those companies.
"Church & Dwight is a consumer products company which produces, among other things, ARM & HAMMER baking soda, dental care toothpaste and Super Scoop Clumping Cat Litter.
"It has also been on an expansion tear in this decade. In 2001, the company acquired USA Detergents, Inc. and the laundry brands XTRA and Nice'N Fluffy.
"The expansion continued later that year when CHD acquired Carter-Wallace, Inc, which had brands such as Arrid Antiperspirant, Trojan Condoms, Nair Depilatories and First Response Home Pregnancy and Ovulation Test Kits.
"In 2003, Church & Dwight acquired an oral care business from Unilever with the Mentadent, Pepsodent and Aim toothpaste brands. The company also owns cleaning brands such as Oxi Clean, Kaboom bathroom cleaners and Orange Glo cleaner products.
"Church & Dwight has surprised on its estimates again. For the 4th straight quarter, Church & Dwight beat Wall Street estimates when it reported third-quarter earnings on Nov 4. Earnings per share were 73 cents compared to analysts' estimates of 69 cents.
"Sales grew 8.7% in the quarter with organic sales, which doesn't include the impact of foreign exchange rates and acquisition and divestitures, increasing by 4%.
"Sales increased in both the domestic and international segments, 9.7% and 4.3%, respectively. Specialty Products also grew 9.4% over the prior year. Gross margins increased slightly to 39.8% compared to 39.5% in the third quarter of 2007.
"Church & Dwight attributed its revenue growth to the increase in gross margins, tighter controls of overhead costs and greater marketing spending to support the company's major brands.
"The company has also been successful at pushing through price increases and by the end of 2008 will have increased prices on over 50% of its product portfolio.
"Despite the tough economic environment, the company still sees a strong fourth quarter and reaffirmed the EPS guidance of $2.83 to $2.85, a 15% to 16% increase over fiscal year 2007. Consensus estimates for the full year are unchanged in the last 3 months at $2.85, which is in line with the company's forecast.
"For fiscal year 2009, Church & Dwight is forecasting organic sales growth of 3% to 4%, 100 basis points increase in gross margin and 60 to 70 basis point improvement in operating margin. The company will provide more specific guidance in February 2009.
"Meanwhile, Church & Dwight has paid a regular quarterly dividend for 431 quarters. The latest dividend, 9 cents a share, will be paid on Dec 1, 2008 to stockholders of record as of Nov 10.
"Fundamentally, Church & Dwight is a Zacks #2 Rank (buy) stock. Its forward P/E is 17.28. Its price-to-book is 2.77. The company has a solid 1-year return on equity (ROE) of 16.03%. Analysts expect 2008 year-over-year earnings growth of 15.09%."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
Five winners of a weak dollar: SBUX, PEP, AAPL
Twitter valuation off by half: NeXt Up Research
Comfort Zone Investing: The unmighty dollar
