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Here's Why Church & Dwight (CHD) Appears to be Sparkling

While the outbreak of COVID-19 has disrupted several businesses, many companies in the consumer staples space appear to be on safe grounds. Incidentally, consumers’ burgeoning demand for essential items amid the pandemic-led stockpiling has kept businesses going in this space. One such consumer staple player benefiting from such trends is Church & Dwight Co., Inc. CHD.

Additionally, this household and personal care products provider has been gaining from its robust brand-building efforts like innovation and prudent acquisitions. Notably, the company with an impressive organic sales trend has seen its shares rally 16.2% in the past three months compared with the industry’s growth of 3.7%. Let’s delve deeper into the factors driving this Zacks Rank #2 (Buy) company, which has a long-term growth rate of 8.2%. Moreover, the company flaunts a VGM Score of B.



Pandemic-Led Demand

Church & Dwight, which shares space with Colgate CL, has been gaining from rising consumer demand for its products amid the coronavirus-led crisis. This also boosted the company’s first-quarter 2020 results, wherein both top and bottom lines improved year over year and beat the Zacks Consensus Estimate. The company witnessed a 30% rise in the consumption of combined U.S. categories. Notably, both household and personal care businesses performed well, with consumers’ shifting preference for essential products. Further, e-commerce sales played a strong role, with more consumers buying online. The company saw growth in all retailer websites and anticipates surpassing its online sales growth target of 9% in 2020.

Notably, Church & Dwight had recently announced that all its products have been categorized as essential commodities, per the requirements and guidance of the government. Hence, the company has been witnessing a significant increase in demand for its products, especially household cleaning products as consumers are focusing on increased cleanliness. Thus, Church & Dwight is seeing high demand for brands like Vitafusion gummy vitamins, OxiClean additives, ARM & HAMMER SIMPLY SALINE, STERIMAR nasal hygiene products and ARM & HAMMER Baking Soda, among others.

Further, demand for brands like FLAWLESS is benefiting from elevated at-home grooming sessions. Management said that it has undertaken steps to increase short-term production capacity for its cleaning and healthcare products. Further, the company is working with retail associates and suppliers to ensure a smooth supply chain and support the increased demand. Clearly, these factors bode well for the company, especially amid the current scenario.

Other Drivers

Church & Dwight boasts a robust brand portfolio, thanks to its focus on innovation and buyouts. Notably, the company earlier said that it looks forward to having 20 power brands in its portfolio over time.  Additionally, the company’s regular innovation helps improve brand positions and market share in the consumer categories. During its first-quarter conference call, management stated that it is focused on innovation and R&D spending for product development even amid the pandemic.

Talking of buyouts, we note that FLAWLESS has been a prudent addition to Church & Dwight’s portfolio. Sales in the FLAWLESS brand continued to rise in the first quarter of 2020 as well. Some of the previous noteworthy acquisitions of the company include WATERPIK, Agro BioSciences and VIVISCAL business.

All said, we believe that Church & Dwight is set to keep its splendid show on. 

Other Solid Players

Clorox CLX has a long-term earnings growth rate of 5.8% and a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Procter Gamble PG currently has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.

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