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Why Church & Dwight Stock Fell ~6%

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Deutsche Bank downgrades CHD

Church & Dwight (CHD) stock fell ~6% on Friday, April 20, 2018, after being downgraded by Deutsche Bank to “hold” from “buy.” Its price target was lowered to $50 per share from $56. Investors are skeptical on the prospects of household and personal care product manufacturers, which are facing increased price competition, a challenging retail scenario, and margin headwinds.

Deutsche Bank downgraded Procter & Gamble (PG) stock to “hold” from “buy” and reduced its target price to $80 from $88. It also lowered its price targets for major US household and personal care product manufacturers Kimberly-Clark (KMB), Clorox (CLX), and Colgate-Palmolive (CL).

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Tepid stock performance

Household and personal care product manufacturer stocks are underperforming the broader market, impacted by soft organic sales and margin headwinds. Procter & Gamble’s recent earnings report strengthened the fact that price competition, brand reinvestments, commodity and transportation cost inflation, and a tough retail landscape, especially with Amazon’s (AMZN) expansion, are denting these companies’ financials. The graph above shows how Church & Dwight, Clorox, Kimberly-Clark, and Colgate-Palmolive stock fell after Procter & Gamble’s earnings release on April 19.

Year-to-date, Church & Dwight stock has fallen ~9%, whereas Clorox, Procter & Gamble, Kimberly-Clark, and Colgate-Palmolive have fallen 23%, 20%, 17%, and 11%, respectively. Church & Dwight’s, Clorox’s, and Procter & Gamble’s stock performance took a toll on the Consumer Staples Select Sector SPDR ETF (XLP), which has significant exposure these companies. This year, XLP has fallen ~11%, while the S&P 500 (SPX) has been roughly flat.

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