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Clorox (CLX - Free Report) , a leading multinational consumer staples conglomerate with a controlling interest in cleaning supplies, was a clear-cut COVID winner. Masked consumers raced to their local drug stores and supermarkets to stock up on everything from Clorox wipes to Glad trash bags (a subsidiary) as the world prepared to lockdown, boosting CLX shares to all-time highs.
Clorox's family of brands posted record revenues in the first few quarters of the pandemic, with its topline growth monetarily breaching 20% (year-over-year) in 2020 as these highly demanded consumer products became scarce commodities.
Clorox's previously low-beta shares took off in the first 7-months of 2020, going from a stable $150 to its $240 peak in early August (60% appreciation), which is when the tide turned as analysts began suspecting peak growth and they weren't wrong.
CLX has since fallen nearly 40% off its 2020 highs as investors begin to realize that the pandemic was more of a moment of glory for Clorox than a sanitation-focused societal shift.
In the first week of February, its latest inflation plagued earnings report showed the market that Clorox's pandemic-thriving business was now struggling to keep its margins above water. Clorox missed EPS estimates because of rapidly reversing sales growth, margin crushing commodity costs, and feeble forward guidance, causing CLX to capitulate nearly 15% in just one session.
CLX is now trading below its pre-pandemic levels as commodity pricing pressures look to be a longer-term headwind than initially priced in.
Analysts have been reeling in their earnings expectations and price targets in tandem, as CLX's net margins get diminished to almost nothing, with inflation driving up costs at the fastest pace in 4-decades. CLX is now sitting at a Zacks Rank #5 (Strong Sell) and could go lower depending on the pivotal January CPI reading, which will have direct implications on Clorox's current quarter costs.
I'm not recommending that you take any position in CLX at this juncture with the stock sitting deep in oversold RSI territory, which could catalyze a technical bounce. Still, I wouldn't want to be holding CLX in this inflationary environment as its margins get pressured down to nothing.
I recommend staying away from CLX until it can generate proven margin-improving results.
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Bear Of The Day: Clorox (CLX)
Clorox (CLX - Free Report) , a leading multinational consumer staples conglomerate with a controlling interest in cleaning supplies, was a clear-cut COVID winner. Masked consumers raced to their local drug stores and supermarkets to stock up on everything from Clorox wipes to Glad trash bags (a subsidiary) as the world prepared to lockdown, boosting CLX shares to all-time highs.
Clorox's family of brands posted record revenues in the first few quarters of the pandemic, with its topline growth monetarily breaching 20% (year-over-year) in 2020 as these highly demanded consumer products became scarce commodities.
Clorox's previously low-beta shares took off in the first 7-months of 2020, going from a stable $150 to its $240 peak in early August (60% appreciation), which is when the tide turned as analysts began suspecting peak growth and they weren't wrong.
CLX has since fallen nearly 40% off its 2020 highs as investors begin to realize that the pandemic was more of a moment of glory for Clorox than a sanitation-focused societal shift.
In the first week of February, its latest inflation plagued earnings report showed the market that Clorox's pandemic-thriving business was now struggling to keep its margins above water. Clorox missed EPS estimates because of rapidly reversing sales growth, margin crushing commodity costs, and feeble forward guidance, causing CLX to capitulate nearly 15% in just one session.
CLX is now trading below its pre-pandemic levels as commodity pricing pressures look to be a longer-term headwind than initially priced in.
Analysts have been reeling in their earnings expectations and price targets in tandem, as CLX's net margins get diminished to almost nothing, with inflation driving up costs at the fastest pace in 4-decades. CLX is now sitting at a Zacks Rank #5 (Strong Sell) and could go lower depending on the pivotal January CPI reading, which will have direct implications on Clorox's current quarter costs.
I'm not recommending that you take any position in CLX at this juncture with the stock sitting deep in oversold RSI territory, which could catalyze a technical bounce. Still, I wouldn't want to be holding CLX in this inflationary environment as its margins get pressured down to nothing.
I recommend staying away from CLX until it can generate proven margin-improving results.