Truist Securities dropped its rating on Church & Dwight Co. ( NYSE: CHD ) to Hold after having the household products stock lined up at Buy.
Analyst Bill Chappell and team believe CHD's two fastest growing businesses during the pandemic, vitamins and cat litter, will drag on organic growth well into 2023 with consumers returning to their pre-pandemic spending patterns. CHD is seen failing to meet its growth algorithm due to the regression back to normal consumer behavior, which in turn is seen pressuring the premium valuation.
Truist is also less enthusiastic about the company’s M&A strategy on the heels of the recent announcement on the planned acquisition of Hero Cosmetics.
"Simply put we believe the acquisitions made over the past 10 years are too small to move the needle for the company, too niche to ever be a “Power Brand” for the company, and too far afield from the company’s core competency. We also worry that the expanded brand portfolio will further tax a management team that prides itself on running a lean ship (the highest revenue per employee in HPC)."
Concerns that CHD's shareholder return could falter over the next few quarters keep Truist on the sidelines for the moment.
The Seeking Alpha Quant Rating on CHD has been at Hold all year.
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Church & Dwight is cut at Truist with consumers returning to their pre-pandemic patterns