Ecolab Inc. (ECL) – Church & Dwight Co., Inc. (CHD): An American Icon Since 1846

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With the recent woes in the market caused by the conflict in Syria, we as investors must make sure our investments are as sound as possible. Being in safe investments allows us to sleep well at night and know that we will come out on top more often than not. Church & Dwight Co., Inc. (NYSE:CHD) fits the description of “best of breed” and has come down over 13% from its 52-week high. This company could be the beaten down name we have all been looking for.

Church & Dwight Co., Inc. (NYSE:CHD)

The company
Church & Dwight Co., Inc. (NYSE:CHD) manufactures and markets personal care, household, and specialty products worldwide. Its brands include Arm & Hammer, Trojan, First Response, Nair, Oxi Clean, and Orajel. It is the leading producer of baking soda in the United States, which is sold in retail packaging, as well as paired with other specialty chemicals for industrial, institutional, medical, and food applications.

Second quarter results
On August 2, Church & Dwight Co., Inc. (NYSE:CHD) released its quarterly results. Like many companies reporting recently, it beat on earnings but missed revenue expectations. Here is an overview of the report:

Earnings per share of $0.61 vs. expectations of $0.60

Revenue of $787.6 million vs. expectations of $790.87 million

Gross margin expanded by 110 basis points to 44.6%

Earnings per share increased 8.93% and revenue increased 13.1% compared to the same period in 2012. Domestic sales of consumer products grew a strong 17.4% in the second quarter, while international sales grew a respectable 9.4%. The disappointing part of the report was the slump in the specialty products segment; net sales fell 12% from 2012, primarily due to colder weather causing demand to decline in the dairy industry. This segment alone could be held responsible for the missed revenue expectations, but regained strength in future quarters will allow for beats on both the top and bottom lines once again.

For the third quarter, management expects the company to earn approximately $0.73 per share; this would represent 10.6% growth year over year. For the full year of fiscal 2013, the company projects earnings of $2.79 per share, which would be a 13.9% increase in earnings from fiscal 2012. Analysts expect this growth to continue through 2015.

Source: YCharts

2014: 11.11% growth

2015: 8.7% growth

Church & Dwight Co., Inc. (NYSE:CHD)’s average price-to-earnings ratio over the last five years is 20.85. If it continued to trade at this average multiple, the stock would exceed $70 per share in 2015. This represents an upside of about 23% from current levels. 23% in just two years is enough to entice any investor.

Dividend aristocrat
On August 1, 2013, Church & Dwight Co., Inc. (NYSE:CHD) declared its 450th consecutive quarterly dividend. This dates its streak of payments back to 1901, surviving the Great Depression, the Great Recession, and every other hectic time in the market. Making it through the toughest of times allows investors to remain confident that this dividend income will always be there; not to mention that the payments have been raised for the last 17 consecutive years. The company currently pays out $1.12 annually, representing a yield of roughly 1.97%. Earnings growth, dividends, and dividend growth make Church & Dwight Co., Inc. (NYSE:CHD) a triple threat.

Expanded view on the industry
Ecolab Inc. (NYSE:ECL) and Stepan Company (NYSE:SCL) are two of Church & Dwight’s fellow companies in the cleaning products industry. Ecolab Inc. (NYSE:ECL) manufactures and markets cleaning products and services to various industries worldwide. Its products range from sanitizers and detergents to lubricants and safety products.

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