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Church & Dwight Co Inc CHD Stock Quote

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Church & Dwight Scoops Up Hero to Bolster Growth but Challenging Dynamics Taking a Toll; Shares Rich

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

As a means to jumpstart growth, no-moat Church & Dwight is adding Hero (a leader in the acne patch category) and its Mighty Patch brand to the mix for $630 million, a deal that is set to close in the fourth quarter. While we see the strategic merit of the tie-up (with the brand slated to chalk up midteens sales growth next year as Church leverages its network within the personal care realm to expand Hero’s distribution), the purchase price is difficult to swallow, with a trailing 12-month price/sales multiple of around 5.5 times. Over the last several years, Church has salivated for deals with rich price tags (including WaterPik, Flawless, Zicam, and TheraBreath). Despite this, we aren’t altering our standard capital allocation rating at this juncture given the small size (at around 2% of sales) and complementary nature of the product set.

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Company Profile CHD

Business Description

Church & Dwight is the leading producer of baking soda in the world. Beyond baking soda, the products in its portfolio have vast category reach, including laundry products, cat litter, oral care, deodorant, and nasal care, all sold under the Arm & Hammer brand. Its mix also includes Xtra, Trojan, OxiClean, First Response, Nair, L’il Critters/Vitafusion, Orajel, and WaterPik, which together with Arm & Hammer constitute more than 80% of its annual sales and profits. In early 2019, the firm announced the addition of Flawless, which manufactures electric shaving products for women. At the end of 2020, the firm acquired Zicam, a leading brand in the cough/cold-shortening category. Church & Dwight derives more than 80% of its sales from its home market in the U.S.

500 Charles Ewing Boulevard
Ewing, NJ, 08628
T +1 609 806-1200
Industry Household & Personal Products
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Employees 5,100

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