Why Analysts Are Neutral on Church & Dwight Stock

Majority of analysts have a ‘hold’ rating

A majority of analysts providing recommendations for Church & Dwight (CHD) stock have a “neutral” outlook, despite the company’s stellar financial performance in the first half of the year and its upbeat sales and earnings outlook.

We believe it’s the company’s high valuation, weak margins, and currency headwinds that are keeping analysts on the sidelines. Church & Dwight stock was trading at a forward PE multiple of 23.8x, which is higher than most of its peers. Church & Dwight stock is also trading at a premium to the S&P 500 Index (SPY).

Why Analysts Are Neutral on Church & Dwight Stock

On August 14, Procter & Gamble (PG), Kimberly-Clark (KMB), Colgate-Palmolive (CL), and Clorox (CLX) stock were trading at forward PE multiples of 18.4x, 16.6x, 21.2x, and 22.2x, respectively.

Church & Dwight is expected to outperform its peers with its sales and earnings growth rate in 2018. However, its margins are expected to remain low. Unfavorable pricing and mix and higher logistics costs are likely to affect its gross margins rate in 2018, which is projected to decline YoY. Currency headwinds also pose a threat to its top-line and bottom-line growth rates.

Ratings summary and target price

Of the 21 analysts covering Church & Dwight stock, 11 have given it a “hold” rating, five have recommended a “buy,” and five have recommended a “sell.” The analysts’ consensus target price of $55.28 per share for CHD stock is near its closing price on August 14.