On Friday, CFRA adjusted its price target for Church & Dwight Co. Inc. (NYSE:CHD), a major manufacturer of household products, raising it to $114 from the previous target of $112. The firm also reaffirmed its Buy rating on the stock.
The new 12-month price target represents a valuation of 33 times CFRA's expected earnings per share (EPS) for 2024, which has been revised upward by $0.06 to $3.46. The 2025 EPS forecast remains unchanged at $3.69. This target price sets a premium over the five-year forward price-to-earnings (P/E) mean of 28.6 times.
Church & Dwight reported a first-quarter adjusted EPS of $0.96, which is an increase of 12.9% year-over-year and surpassed expectations by $0.09. The company's revenue reached $1.5 billion, marking a 5% increase from the previous year and aligning with the consensus estimates. Organic growth for the quarter was reported at 5.2%, driven by a combination of 1.6% in price and mix improvements and 3.6% in volume growth.
The company's performance was broken down by segment, with Domestic sales growing organically by 4.3%, International by 8.8%, and Specialty products by 7.2%. However, certain products faced challenges; Waterpik sales were affected by retail resets, and the gummy vitamin category saw a 5% decline, with Church & Dwight experiencing a 12% drop in that area.
Gross margin improved by 220 basis points to 45.7%, aided by effective pricing and productivity initiatives. Marketing expenses as a percentage of sales went up by 160 basis points, and selling, general and administrative (SG&A) expenses increased by 80 basis points. This led to a slight contraction in EBIT margin by 20 basis points.
Despite the margin pressures, Church & Dwight has upgraded its margin expansion guidance to 75 basis points and now anticipates an 8.5% growth in EPS at the midpoint. While the revenue outlook remains unchanged, the company is optimistic about the potential impact of new product launches and market expansions, which are expected to contribute 2% to organic growth in the second quarter.
InvestingPro Insights
With Church & Dwight's (NYSE:CHD) recent performance exceeding expectations, it's worth noting the strategic financial metrics that may influence investor sentiment. According to InvestingPro data, Church & Dwight boasts a market capitalization of $25.92 billion, reflecting its substantial presence in the household products sector. The company's P/E ratio stands at 33.63, indicating a premium pricing relative to near-term earnings growth, which aligns with CFRA's valuation approach in setting their new price target. Additionally, the revenue growth for the last twelve months as of Q1 2024 is reported at 7.86%, showcasing the company's ability to increase its top-line figures in a competitive market.
Investors may find comfort in Church & Dwight's track record of dividend reliability, as highlighted by the InvestingPro Tip that the company has raised its dividend for 19 consecutive years. Moreover, the stock's low price volatility can provide a sense of stability in an often turbulent market. For those seeking further insights, InvestingPro offers additional tips on Church & Dwight, which can be accessed at https://www.investing.com/pro/CHD. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover 14 more InvestingPro Tips that could help guide your investment decisions.
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