uploads///detergent _

What’s Ahead for Church & Dwight and Clorox?


Mar. 20 2019, Updated 8:09 a.m. ET

Stock performance

Church & Dwight (CHD) and Clorox (CLX) have underperformed peers so far this year as margin woes and high valuations are keeping investors on the sidelines. However, we expect both these consumer packaged goods (or CPG) manufacturers to outperform peers including Procter & Gamble (PG), Kimberly-Clark (KMB), and Colgate-Palmolive (CL) with their sales and earnings growth rate, which in turn, could support the uptrend in their stocks.

Church & Dwight and Clorox are up 0.9% and 1.8%, respectively, on a YTD basis as of March 19. In comparison, Procter & Gamble, Colgate-Palmolive, and Kimberly-Clark have registered gains of 10.9%, 10.5%, and 5.3%, respectively.

The S&P 500 is up 13.0% and the Consumer Staples Select Sector SPDR Fund, which invests about 25% of its holdings in these five CPG stocks, is up 7.8% on a YTD basis.

Article continues below advertisement

Growth drivers

The weakness in  CHD and CLX could well be a buying opportunity, as we expect both Church & Dwight and Clorox to sustain the momentum in sales on the back of innovation-led products. Meanwhile, price restructuring initiatives are likely to support net sales growth. In comparison, the top line of PG, KMB, and CL are expected to remain pressured in the near term, reflecting heightened competition and an adverse currency rate.

Meanwhile, improved sales and cost-savings are expected to drive the bottom line of CHD and CLX. In comparison, the bottom line of CL and KMB are expected to decline, reflecting increased cost pressure and a higher tax rate. PG is expected to sustain bottom-line growth. However, the rate of growth is likely to remain lower than that of CHD and CLX.

However, the high valuation metric and cost headwinds could limit the upside in CHD and CLX stock.


More From Market Realist

  • A "now hiring" sign outside a Popeyes restaurant, one sign that employers are having trouble finding employees willing to work for current wages.
    Why Employers Are Struggling To Fill Jobs Despite High Unemployment
  • Beyond Meat patties in a grocery cart
    Buying the Dip on Beyond Meat (BYND) Stock Is a Risky Move
  • People looking at data on a laptop
    Is Driven Brands (DRVN) a Good Stock to Buy? A Look at the Year Ahead
  • A Moscow Mule drink made with Reed's
    Is Reed's (REED) a Good Stock to Buy? A Look at the Year Ahead
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.