Will Church & Dwight Stock Rise on Its Waterpik Acquisition?



Deal strengthens oral care portfolio

Church & Dwight Co. (CHD) recently announced that it had entered into an agreement to acquire Waterpik for $1.0 billion in cash. The deal is a strategic one, and it’s in line with CHD’s strategy to acquire leading brands in new and fast-growing avenues.

Waterpik is the market leader in terms of dental floss and showerhead products in the United States (SPY). It had generated net sales of ~$265 million in the trailing 12 months as of June 30, 2017. The company will issue debt to finance its acquisition of Waterpik, and it expects to close the deal during 3Q17.

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Waterpik will be part of CHD’s oral care portfolio, which includes renowned names such as ARM & HAMMER toothpaste and Spinbrush battery-operated toothbrushes. The company’s recent move is expected to strengthen its existing portfolio in the oral care segment and accelerate its top and bottom line growth. Water flossers are in demand, and that demand is quickly rising.

Church & Dwight’s management expects the deal to be EPS-accretive (earnings per share) in 2018, and it expects its bottom line to benefit 3% from the acquisition. The company expects its adjusted EPS to be in the range of $2.07–$2.09, a rise of ~9% on a YoY (year-over-year) basis. However, in terms of its guidance for 2017, CHD’s management has reiterated its earlier guidance of adjusted EPS of $1.92.

Will CHD rise?

Church & Dwight stock rose ~1.4% and closed at $53.33 on July 17, 2017, following its announcement of the Waterpik deal. Moreover, on a YTD (year-to-date) basis, CHD has risen ~20.7%. CHD stock has outperformed the broader index in terms of returns. YTD, the S&P 500 Index (SPX) has risen 9.8%.

Church & Dwight’s recent move is likely to fortify its position in the oral hygiene segment, resulting in higher sales and EPS. The company is generating industry-leading sales and profitability growth in a slow-growth environment, which is lifting its stock higher.

In comparison, CHD’s peers The Clorox Company (CLX), Colgate-Palmolive (CL), and Kimberly-Clark (KMB) have seen their stock prices rise 9.5%, 10.9%, and 9.3%, respectively, YTD as of July 17, 2017.


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