On Friday, Church & Dwight Co. Inc. (NYSE:CHD) shares had its price target increased by Evercore ISI from $107.00 to $110.00, while the firm kept a neutral In Line rating on the stock.
The adjustment follows Church & Dwight's guidance, which anticipates a moderation in second-quarter sales and a lower earnings per share (EPS), despite a noticeable rise in U.S. retail sales in April.
The company's cautious stance is reflected in their recent statement that they usually do not alter their outlook after the first quarter. This approach is considered prudent given the context of their first-quarter tracked retail sales, which increased by 7.5%, including contributions from major retailers such as Costco (NASDAQ:COST), Amazon (NASDAQ:AMZN), and Ulta. However, Church & Dwight's U.S. shipment growth was reported at 4.3%, indicating a lag behind retail sales that is larger than what is typically seen.
Competitor Procter & Gamble noted a 2-point impact from slower retailer reorders, but Church & Dwight expects limited destocking effects, primarily concerning their Waterpik brand, with only a one-point impact. Notably, Waterpik sales picked up again in April, contributing to an 8% increase in sales for the month.
The discrepancy between retail performance and shipment or organic sales is predicted to grow in the second quarter. This is partly due to Church & Dwight's plans to promote their new premium Arm & Hammer detergent, Deep Clean, with coupons, which are not tracked by scanner data.
The company's promotional strategy for Deep Clean is anticipated to affect Henkel's All brand more so than products from Procter & Gamble. Church & Dwight's approach to supporting the launch of Deep Clean with coupons is a strategic move to bolster the product's market presence and consumer appeal, despite the impact these promotions may have on the tracking of sales data.
InvestingPro Insights
Following the recent updates on Church & Dwight's financial outlook and Evercore ISI's price target adjustment, InvestingPro data provides further context on the company's financial health and market performance. With a market capitalization of $25.92 billion and a P/E ratio of 33.63, Church & Dwight is trading at a valuation that reflects its stable position in the market. The company's revenue growth over the last twelve months as of Q1 2024 stands at 7.86%, showcasing a healthy upward trajectory.
Notably, Church & Dwight has a track record of consistent dividend growth, having raised its dividend for 19 consecutive years, which speaks to the company's commitment to returning value to shareholders. Moreover, the firm's liquid assets surpass its short-term obligations, indicating a strong liquidity position. This financial stability is crucial for the company as it navigates the challenges of promotional strategies and retail sales dynamics.
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