On Friday, Goldman Sachs (NYSE:GS) adjusted its outlook on Church & Dwight Co. Inc. (NYSE:CHD), increasing the price target to $116 from $110 while sustaining a Buy rating on the stock. The consumer goods company, known for its household products, posted first-quarter results for 2024 that exceeded expectations, with organic sales growth reaching 5.2%. This uptick was attributed to a 3.7% increase in volume and a gross margin expansion surpassing forecasts.
Church & Dwight's management has chosen to keep its full-year 2024 organic sales growth projection between 4% and 5%. Still, the company now anticipates a higher gross margin expansion and has consequently elevated the lower end of its full-year 2024 earnings per share (EPS) growth outlook to 8-9%, up from the previous 7-9%.
Despite this optimistic adjustment, the company has cautioned that the second quarter's growth for both top and bottom lines may fall short of expectations. This is due to anticipated moderation in gross margin expansion and an increase in marketing expenditures to support its robust pipeline of new products.
The company's strong performance in the first quarter was driven by effective execution and benefits from recent acquisitions that have shown high growth, such as Therabreath and Hero. Church & Dwight has successfully broadened distribution for these brands, and Goldman Sachs anticipates further expansion opportunities. The firm also expects Church & Dwight's international growth efforts to contribute to its long-term organic sales growth, which is considered top-tier.
Goldman Sachs remains optimistic about Church & Dwight's future, citing the company's robust top-line growth. The firm's analysts believe that the stock will experience a positive re-rating due to these factors. Despite keeping earnings per share estimates largely unchanged, the increased price target reflects Goldman Sachs' confidence in the company's ability to continue its growth trajectory.
InvestingPro Insights
Goldman Sachs' positive outlook on Church & Dwight aligns with some key metrics and InvestingPro Tips. The company's commitment to shareholder returns is evident, as it has raised its dividend for a remarkable 19 consecutive years, underlining a stable financial strategy.
Moreover, Church & Dwight's revenue growth over the last twelve months as of Q1 2024 stands at a solid 7.86%, showcasing its ability to expand organically amidst market challenges. With a Market Cap of $25.92B and a P/E Ratio of 33.63, the company is poised for future growth, which is further supported by a PEG Ratio of 0.42, indicating potential for earnings growth relative to its P/E ratio.
Investors should note that while three analysts have revised their earnings downwards for the upcoming period, Church & Dwight maintains a strong financial position with liquid assets exceeding short-term obligations. For those interested in further insights, there are additional InvestingPro Tips available, which can be accessed through the dedicated InvestingPro platform. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover more about Church & Dwight's investment potential.
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