Consumer staple stocks Clorox ( NYSE: CLX ) and Church & Dwight ( NYSE: CHD ) were reinstated with “Sell” ratings at Bank of America as the bank expects persistent cost pressures to promote a continued post-pandemic decline for each.
For both names, a team of the bank’s analysts led by Bryan Spillane indicated that margins are likely to remain a key concern, with price increases thus far unable to insulate the companies’ bottom lines. Further, a bounce-back in sales to 2019 levels remains a shaky proposition.
“We believe a full recovery to pre-COVID levels is farther out than the next two years, due to incremental cost inflation and an increase in demand destruction amid pricing pressure,” Spillane said. “Clorox has taken 3 rounds of price increases in the last twelve months to offset cost inflation pervasive in all areas of its business, but it is unclear if there is room for further pricing near-term if cost inflation proves more difficult to combat.”
For Church & Dwight ( CHD ), a concern on consumer trade-down is particularly pronounced, in his view. He added that a concentration of sales in Walmart and persistent supply chain problems make for a “difficult setup” in the next twelve months.
Spillane assigned a $75 price target to Church & Dwight ( CHD ) shares while Clorox ( CLX ) was given a $130 target. Shares of Clorox and Church & Dwight ( CHD ) opened at about $140 and $79, respectively.
Read more on Bank of America’s dividend stock recommendations .
For further details see:
Clorox, Church & Dwight rated ‘Sell’ at BofA due to cost concerns