Is Church & Dwight A Suitable Option For Your Portfolio Now?

You must take a look at Church & Dwight Co., Inc. (NYSE:CHD) as the stock looks good on the back of its brand portfolio, strategies and first-quarter 2017 results. This Zacks Rank #3 (Hold) stock boasts a Growth Score of “A” with a long-term earnings growth rate of 9.2%, which further highlights its inherent attributes. Let’s find out more.

Delving Deeper

Armed with a robust brand portfolio, Church & Dwight makes regular innovations and is well-positioned in the consumer product categories. In 2017, the company is launching ARM & HAMMER CLUMP & SEAL SLIDE cat litter and ARM & HAMMER unit dose 3-in-1 POWER PAKS laundry detergent. Additionally, it is introducing a new VITAFUSION energy variant that supports everyday energy needs and alertness.

In fact, the company has a healthy cost management structure that is encouraging. Alongside, Church & Dwight is geared to expand its market share through strategic acquisitions. Evidently, on May 1, it acquired Agro BioSciences, Inc., a leader in developing custom probiotic products for poultry, cattle and swine. This business complements the company’s animal productivity business and is expected to be neutral to earnings per share in 2017 due to transition costs. In 2018, the company expects the acquisition to be accretive to earnings per share.

A glance at its financial performance shows that Church & Dwight posted better-than-expected results in the first quarter of 2017, wherein both earnings and revenues beat the estimates and improved year over year. Further, productivity initiatives and the impact of higher margin acquired business led to margin expansion. (Read more: Church & Dwight Q1 Earnings & Revenues Beat Estimates). Notably, in the past seven quarters the company’s earnings and sales have outpaced the Zacks Consensus Estimate in four and six quarters, respectively.

However, the stock is not devoid of challenges. Church & Dwight has been witnessing pricing pressures, rising commodity costs, stiff competition and weak consumer demand in many markets. Further, management anticipates a competitive environment in 2017 due to new product introductions by competitors and persistent pricing pressure. Also, it expects rising commodity costs and foreign currency headwinds to prevail in 2017.

Considering price-to-earnings (P/E) ratio, Church & Dwight looks pretty overvalued when compared with the industry as well as the S&P 500. The stock has a trailing 12-month P/E ratio of 26.80, which is still below its median level of 27.60 and high level of 30.37 scaled in the past one year. On the contrary, the trailing 12-month P/E ratio for the industry and the S&P 500 are 19.68 and 20.05, respectively.

Bottom Line

We note that shares of Church & Dwight gained 12.5% year to date, in line with the Zacks categorized Soap & Cleaning Preparations industry. Notably, the industry is currently placed at top 9% (23 out of 256) of the Zacks Classified industries. Going forward, the stock is likely to gain momentum and is expected to overcome the hurdles efficiently to become an investor’s favorite.

Meanwhile, investors can count on some better-ranked stocks in the broader Consumer Staples sector that include Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) , Energizer Holdings, Inc. (NYSE:ENR) and Tupperware Brands Corporation (NYSE:TUP) .

Ollie's Bargain, with a long-term earnings growth rate of 17.1% has surged 66.1% in the past one year. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Energizer, a Zacks Rank #2 (Buy) company rose 22% in the last six months. Also, it has a long-term earnings growth rate of 9.8%.

Tupperware Brands, a Zacks Rank #2 stock has jumped 36.2% year to date. Also, it has a long-term earnings growth rate of 12%.

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