Church & Dwight (NYSE:CHD) reported its shares gained ground Tuesday, as Morgan Stanley upgraded the consumer goods maker to overweight from equal weight and boosted its price target to $91 from $82.
Following a long period of underperformance in comparison to peers, the firm now expect a sharp fundamental turn in 2023 to above-consensus organic sales (+4.2%) and gross margin results.
Analyst Dara Mohsenian: "We see consensus EPS as now reasonable for 2023 even with assumed SG&A reinvestment, with likely potential room for upside later in H2. CHD's topline growth should reaccelerate in 2023 amid continued momentum in the core business as reflected in scanner data, and moderating headwinds in problem areas Waterpik, Flawless, and vitamins, with robust 2H23 organic sales growth of 6.4%, +730 bps above expected CHD 2022 performance but also +90 bps ahead of peers PG/CL as CHD cycles the worst of the 2022 headwinds mentioned above."
Church & Dwight is also expected to benefit this year from higher marketing spending, more normalized promotion, and a supply chain recovery. Morgan Stanley expects a gross margin to surprise to the upside due to its skew to U.S.-based resin and lack of European cost exposure vs peers.
Morgan Stanley assigned a price target of $91 to CHD.
In another ratings boost, Credit Suisse upgraded CHD to Outperform and set a price target of $95.
CHD shares leaped $3.88, or 4.7%, first thing Tuesday to $85.79.
