Oppenheimer: Waterpik, Arm & Hammer Owner Church & Dwight Well-Positioned In Retail

Consumer staples name Church & Dwight Co., Inc. CHD is a retail winner, with category-leading brands and rising online penetration, an Oppenheimer analyst said in a Wednesday upgrade.

The Analyst

Oppenheimer analyst Rupesh Parikh upgraded shares of Church & Dwight from Perform to Outperform with an unchanged $54 price target.  

The Thesis

Church & Dwight has an "attractive" brand portfolio and leads key categories, Parikh said in a Wednesday note. (See the analyst's track record here.) 

The company behind brands such as Arm & Hammer, Waterpik and Vitafusion has consistently rolled out new products and faces relatively less private-label competition, the analyst said. 

Church & Dwight is well-positioned for a shifting retail landscape, with its online penetration having more than doubled from 2 percent in 2016 to 5 percent of sales in 2017, Parikh said.

A strong partnership with Walmart Inc WMT and Amazon.com, Inc. AMZN will help going forward and assist in Church & Dwight's international expansion, the analyst said. 

Shares have moved down 4 percent from early January highs, tracking the S&P 500 Index — despite company metrics moving higher to account for the benefits of tax reform and "a solid, above-plan Q4," Parikh said. Key insiders were buying in the mid-$40s in early November, he said. 

While noting that the company has demonstrated consistent success on the M&A front, Oppenheimer does not project any material acquisition in the near-term, but said M&A could occur later in 2019 as the leverage declines closer to 1.5 times.

To account for the U.S. tax cut, Oppenehimer raised its estimates for Church & Dwight. That said, sentiment remains muted, with the sell-side tally showing six buys versus 12 holds and five sells, Paikh said. 

"Our buy-side conversations on CHD remain muted," he said. 

The Price Action

Church & Dwight shares are up more than 5 percent over the past year.

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