Church & Dwight: Uncertain Whether FY24 Guidance Can Be Met

Core Viewpoint - Church & Dwight Co. (CHD) is expected to have a rangebound share price in the near term until positive indicators emerge to support its ability to meet FY24 organic sales guidance [2][8] Company Overview - CHD develops, manufactures, and markets a variety of household, personal care, and specialty products, generating 90% of its revenue from the US and 10% from international markets [3] Earnings Results Update - In 2Q24, CHD reported total revenue of $1.51 billion, with organic sales growth of 4.7%, driven by a 9.3% increase in consumer international sales, while consumer domestic sales grew only 3.8% [4] - Gross margin was 45.4% and EBIT margin was 20.9%, leading to an operating EPS of $0.93 [4] Uncertainty in Meeting FY24 Guidance - CHD revised its FY24 organic sales outlook down to 4%, indicating a significant deceleration in growth from 1H24 [5] - The company experienced poor performance in June and July, with main categories growing only ~2% compared to 4.5% in the first five months of the year [5] - Mixed macroeconomic signals complicate the outlook for consumer spending, affecting investor sentiment towards CHD [5] Volume Growth Drivers - CHD's ability to drive volume growth hinges on macroeconomic recovery and successful innovation [6] - Recent product innovations, such as the Arm & Hammer liquid detergent and TheraBreath mouthwash, have shown promising market share gains [6] Valuation - CHD's stock trades at approximately 28x forward PE, which is considered expensive compared to peers like Procter & Gamble and Colgate-Palmolive, which trade at around 25x forward PE [7] - If CHD fails to meet its FY24 guidance, there is potential for the stock to decline to a 25x valuation [7] Conclusion - The path to achieving FY24 guidance for CHD remains uncertain due to mixed macroeconomic conditions, decelerating volume growth, and high valuation relative to peers [8]