Why 2019 Wasn’t As Good As 2018 for Church & Dwight Stock

Although Church & Dwight stock is trading in the green, it has lagged its peers and the broader markets. The stock didn’t repeat its 2018 performance.

Amit Singh - Author

Dec. 31 2019, Published 7:34 a.m. ET


Church & Dwight (CHD) stock has risen 7% year-to-date as of Monday.

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Church & Dwight stock lagged peers

Although Church & Dwight stock is trading in the green, it has lagged its peers and the broader markets. The stock didn’t repeat its 2018 performance.

Notably, Church & Dwight stock increased by about 31% in 2018. In comparison, Kimberly-Clark (KMB) and Colgate-Palmolive (CL) shares fell 5.6% and 21.1%. Meanwhile, Procter & Gamble (PG) stock was flat.

Church & Dwight’s outperformance stemmed from its industry-leading organic sales and EPS growth rate. Innovation, acquisitions, and lower effective tax rates boosted the company’s financial performance and its stock.

In 2019, Church & Dwight’s growth rate moderated, which limited the upside in the stock. Meanwhile, the high valuation kept investors at bay.

So far this year, the S&P 500 has risen 28.5% compared to 7% growth in Church & Dwight stock. Meanwhile, Procter & Gamble, Kimberly-Clark, and Colgate-Palmolive shares have risen 35.4%, 20.1%, and 15.6%, respectively.

Factors limit growth for Church & Dwight stock

Church & Dwight’s net and organic sales growth have shown signs of moderation. The company’s organic sales increased by 3.6% in the last reported quarter. The growth rate was better than management’s expectation. However, the growth rate moderated sequentially.

Church & Dwight’s organic sales have grown at more than a 4% rate over the past five quarters before the last reported quarter. The organic sales growth rate could moderate more in the fourth quarter, which reflects challenges in the specialty products division. There’s also pressure on volumes from higher pricing in the consumer domestic segment.

Notably, Church & Dwight’s third-quarter top line missed Wall Street’s estimate after beating it for several quarters, which didn’t sit well with investors. Meanwhile, analysts expect the company’s top-line growth rate to moderate in 2019 compared to 2018.

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Further, the company’s EPS has grown at a double-digit rate in the last eight consecutive quarters. However, analysts’ estimates indicate that the EPS could decline in the fourth quarter. Management expects a 5% decline in the bottom line in the fourth quarter. Lower organic sales and higher planned investments in marketing and research and development will likely take a toll on the company’s bottom line.

Also, Church & Dwight stock trades at a higher valuation multiple compared to its peers. Moderating growth and a high valuation continue to limit the upside in the stock.

In comparison, Procter & Gamble offers better growth with a low valuation.

Analysts are on the sidelines

Most of the analysts maintain a neutral outlook on Church & Dwight stock. Among the 18 analysts, 11 recommend a “hold,” five recommend a “buy,” and two recommend a “sell.” Analysts’ target price of $72.69 indicates an upside of 3.3% based on the closing price of $70.35 on Monday.


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