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Morgan Stanley Likes Clorox and Church & Dwight Based on Their Stance on Household Products By Investing.com

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© Reuters. Morgan Stanley likes Clorox and Church & Dwight based on household products position

By Sam Boughedda

Morgan Stanley upgraded Clorox (NYSE:) and Church & Dwight (NYSE:) from underweight to equal weight in a note Monday during the downgrade Edgewell Personal Care Company (NYSE:) to underweight.

Analysts told investors in the wide-ranging Consumer Staples note that they “expect strong third-quarter EPS in beverages with modest pricing power/elasticity of demand, with an advantage confirmed by PEP’s exceptional sales growth of 16%.

Analysts also lowered Edgewell’s price target to $36 from $40 per share.

“Our CHD and CLX upgrades align with our less selective stance in household products, with: a) potential margin upside in FY23 as lower raw material costs occur with prices generally stable, b) after a pronounced underperformance in equities, valuation looks reasonable with CHD/CLX underperforming the base peers by -1,800/-1,400 bps YTD vs EPC at +2,400 bps in the LTM , and c) the US-centric combination of the two stocks provides defensive coverage in a challenging macro/FX environment,” the analysts wrote.

The Morgan Stanley (NYSE:) Analysts also noted that Church & Dwight’s stock “could get more compelling” if the company’s management sets a conservative earnings/EPS basis for 2022, which hasn’t happened with a Upper guide lower in September, or lower expectations for 2023. They added that if investors perceive a safe EPS base, they believe the stock may begin to recoup some recent losses as investors look ahead .

“We like CLX and ELF as positive trades in the quarter with strong EPS upside, which we expect to continue at LT at ELF,” the analysts confirmed. “We view EPC as negative trade on weaker than expected FY23 forecast, and EL on lower FY forecast with continued COVID pressure in China, FX pressure and larger macro impacts.”