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Investing.com -- RBC Capital Markets upgraded Church & Dwight (NYSE:CHD) to Outperform from Sector Perform and raised its price target to $114 from $100, saying recent underperformance creates an attractive entry point and expressing renewed confidence following meetings with management.
The stock is down 6.3% year-to-date and has lagged the consumer staples ETF by over 10 percentage points.
RBC said the recent pullback, driven by soft first-quarter results and macro concerns, has likely run its course.
Church & Dwight’s guidance adequately reflects the current challenges, including destocking, slower category growth, and tariff impacts, according to analysts.
The firm added that recent consumption trends have stabilized, with scanner data showing modest gains in recent weeks.
CHD expects U.S. sales, which account for about 80% of revenue, to decline slightly in 2024, with a modest recovery in the second half.
Gross tariff exposure was pegged at $190 million, though the net impact is expected to be lower due to easing tariff rates and internal efficiencies.
RBC also expressed optimism about the company’s acquisition of Touchland, a fast-growing hand sanitizer brand. The $130 million business is expected to deliver double-digit growth and become accretive to earnings by 2026.
Touchland, which has gained popularity among younger consumers, is seen as a strategic fit alongside recent successful acquisitions like Hero and TheraBreath.
RBC expects its distribution through premium channels like Sephora and Amazon (NASDAQ:AMZN) to drive further growth.
The firm also noted that Church & Dwight gained market share in 9 of its 14 major brands in Q1, with volume growth across 80% of the portfolio, a rare feat in the current environment.
RBC raised its 2025-26 earnings estimate and said CHD’s operating margin outlook is now tracking toward the upper end of its long-term target.