Church & Dwight: Analysts Have a ‘Hold’ Recommendation



Church & Dwight outperformed its peers

Church & Dwight (CHD) has outperformed its peers with its strong sales and earnings growth during the first half of 2018. While Procter & Gamble (PG), Kimberly-Clark (KMB), and Colgate-Palmolive (CL) have struggled to drive organic sales, Church & Dwight has been successful.

The company’s top line has grown at an impressive double-digit rate in the past three quarters, while organic sales increased 4.4%—the highest among its peers—during the last reported quarter. Church & Dwight’s innovation-led new products continue to drive strong volumes growth and its organic sales.

Stellar sales growth and a considerable decline in the tax rate are supporting the double-digit growth in Church & Dwight’s earnings. Analysts expect the company’s bottom line to grow 17.5% in 2018, which is encouraging.

However, the company’s high valuation could stall the uptrend in Church & Dwight stock. Church & Dwight trades at 26.1x the 2018 estimated EPS of $2.28 and 24.2x the 2019 estimated EPS of $2.45—both seem expensive based on the anticipated growth rates of 17.5% and 7.5%, respectively.

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Rating and target price

Given the company’s high valuation, most of the Wall Street analysts maintain a “neutral” outlook on Church & Dwight stock. Low pricing and cost headwinds are expected to hurt the margins in the coming quarters.

Among the 22 analysts covering the stock, 11 analysts recommend a “hold,” six analysts recommend a “buy,” and five analysts recommend a “sell.”

Analysts have a consensus target price of $56.05 per share on Church & Dwight stock, which indicates a downside of 5.6% based on its closing price of $59.40 on September 26.


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