Church&Dwight Co. Inc.

We believe C&D can rapidly deleverage because of its solid cash flow generating capability, track record as an effective acquirer, and financial flexibility with respect to share repurchase activity. For example, it restored leverage to 2x from the high-2x area within 18 months of acquiring WaterPik in the summer of 2017, its largest acquisition to date. The company pulled back on share repurchases and prioritized debt reduction. The stable outlook reflects our expectation that C&D will continue to increase organic revenues in the low-single-digit percents and generate consistently solid free cash flow, while maintaining an appetite for accretive acquisitions such that long-term leverage is sustained in the low-2x area. We expect leverage could occasionally increase to the high-2x area, but

...The company has consistent organic revenue growth with a portfolio that benefits from current trends. Church & Dwight Co. Inc.'s (C&D) long-term model target is at least 3% organic revenue growth. Historically, the company has met or exceeded that target. Most recently, for the first quarter ended March 31, 2020, C&D generated organic revenue growth of over 9%, with volumes up 7% and price/mix up 2%. Demand increased as a result of the COVID-19 pandemic as consumers stocked up on vitamins, cleaning supplies, and personal hygiene products. We expect the company to continue to benefit from consumers' focus on personal care and hygiene as the coronavirus pandemic persists. However, it is uncertain if the increased demand will sustain as the coronavirus impacts lessen. We expect strong credit measures for 2020 and 2021. We forecast leverage to drop to 1.5x-2x for fiscal 2020 from about 2.2x in 2019, absent a large, debt-financed acquisition and funds from operations (FFO) to debt to improve...

Full Report