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Stifel Rated Church & Dwight a ‘Hold’

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Price movement 

Church & Dwight (CHD) has a market cap of $12.9 billion. It fell by 2.1% to close at $99.57 per share on July 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.7%, -0.31%, and 18.2%, respectively, on the same day. CHD is trading 0.71% below its 20-day moving average, 1.2% above its 50-day moving average, and 11.1% above its 200-day moving average.

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Related ETF and peers

The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.5% of its holdings in Church & Dwight. The ETF tracks an equal-weighted index of large-cap US consumer staples stocks drawn from the S&P 500. The YTD price movement of RHS was 11.3% on July 12.

The market caps of Church & Dwight’s competitors are as follows:

  • The Procter & Gamble Company (PG): $230.6 billion
  • Colgate-Palmolive (CL): $66.1 billion
  • The Clorox Company (CLX): $17.7 billion

Church & Dwight’s rating

Stifel has initiated the coverage of Church & Dwight Company with a “hold” rating.

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Performance in 1Q16

Church & Dwight reported 1Q16 net sales of $8.5 billion, an increase of 4.5% compared to net sales of $8.1 billion in 1Q15. The company’s cost of sales as a percentage of net sales fell by 1.8%, and its operating income rose by 4.3% in 1Q16 compared to 1Q15.

Its net income and EPS (earnings per share) rose to $1.13 billion and $0.86, respectively, in 1Q16 compared to $1.07 billion and $0.80, respectively, in 1Q15.

Church & Dwight’s cash and cash equivalents fell by 41.1%, and its inventories rose by 6.2% in 1Q16 compared to 4Q15. Its current ratio fell to 0.78x, and its DE (debt-to-equity) ratio rose to 1.2x in 1Q16 compared to a current ratio and DE ratio of 1.0x and 1.1x, respectively, in 4Q15.

Projections

Church & Dwight has made the following projections for 2016:

  • organic sales growth of 3%–4% due to the introduction of new products in its core business
  • gross margin of ~0.75% due to lower commodity costs, productivity programs, and the reduction of vitamin startup costs
  • operating margin expansion of ~0.50%
  • free cash flow of 125% compared to net income
  • adjusted EPS growth of 7%–9%

The company made the following projections for 2Q16:

  • organic sales growth of 2%–3%
  • margin expansion and adjusted EPS of $0.79 per share
  • reported EPS growth of 44%

The company will also have some new products, including Arm & Hammer Clump & Seal MicroGuard, dual chamber unit dose laundry detergent, a new beauty line of adult vitamins, and a new Riviera lubricant.

In the next part of our series, we’ll take a look at ConAgra Foods.

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