Investors Should Refrain From Warming Up to Church & Dwight After Its Frigid Q4 Marks

We don’t expect to alter our $58 fair value estimate for no-moat Church & Dwight materially after parsing through its uninspiring fourth-quarter results. Organic sales edged up a mere 40 basis points (as a 4.2% benefit from higher prices was partially offset by a 3.8% volume slump) and its gross margin slipped 50 basis points to 42%. We posit this subpar performance supports our contention that Church has failed to carve out a competitive edge, though the market doesn’t seem to share our sentiment (as shares edged up 4% on the print), rendering the stock about 40% overvalued relative to our intrinsic valuation. In this vein, we estimate the market price implies 5% average annual organic revenue growth over the next decade and operating margins that improve to the mid-20s, both of which outpace our respective expectations for 3% and low-20s, respectively.