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The Clorox Company (CLX - Free Report) posted impressive third-quarter fiscal 2018 results, surpassing the Zacks Consensus Estimate on both counts. Earnings and revenues also improved on a year-over-year basis. This marks the company’s sixth straight quarter of earnings beat, with sales returning to positive after a miss in the previous quarter.
Q3 Highlights
Quarterly earnings from continuing operations of $1.37 per share were up 5% year over year and surpassed the Zacks Consensus Estimate of $1.30. The bottom line primarily gained from higher sales and lower effective tax rate, offset by contraction in gross margin.
The Clorox Company Price, Consensus and EPS Surprise
Net sales of $1,517 million advanced nearly 2.7% year over year and marginally came ahead of the Zacks Consensus Estimate of $1,511 million. Top-line growth can be attributed to improvement across all the company’s segments as well as 2020 Strategy, which focuses on boosting growth for the improvement of categories and overall market share. Also, volume growth of 3% in the quarter along with higher prices aided the increase in revenues. The uptick was somewhat compensated with adverse mix and negative impact from the sale of the Aplicare business.
Clorox witnessed significant pressure on gross margin, which contracted 120 basis points (bps) to 42.8% in the quarter. Lower margins can be attributed to elevated commodity and logistics expenses, which were partly mitigated with gains from cost savings and higher prices.
Revenue by Segment
Sales in the Cleaning segment improved 3% to $513 million, mainly driven by gains in Home Care, showing strength in Clorox disinfecting wipes along with the launch of Scentiva branded products. This was partly offset by fall in Professional Products business, particularly due to the sale of Aplicare business in August 2017.
Household sales inched up 1% to $493 million backed by double-digit gains in the Cat Litter business owing to broad-based business strength. This was partly offset with lower shipments in Charcoal owing to unfavorable weather throughout the quarter.
Sales at the Lifestyle segment improved 2% to $252 million driven by all-time record shipments of Hidden Valley bottled dressings and gains in the Natural Personal Care business. The upside was negated by lower shipments in Water Filtration due to a timing shift in the merchandising activity.
At the International business segment, sales grew 4% to $259 million backed by improved pricing and increased volumes in Canada. However, these factors were offset by adverse mix and foreign currency exchange rates.
Financials
Clorox ended the quarter with cash and cash equivalents of $1,174 million, and long-term debt of $1,789 million. In the nine months of fiscal 2018, the company generated $574 million of net cash from continuing operations.
2018 Guidance
Clorox updated its guidance for fiscal 2018 to include the effects from the acquisition of Nutranext and revised tax rate.
The company now projects sales growth of nearly 3% compared with the earlier guided range of 1-3%. The guidance includes contribution of 1 point from the Nutranext acquisition and an estimated 3 points gain from product innovation. Also, it includes nearly 1 point reduction in the fiscal year related to the Aplicare divestiture.
Gross margin is now estimated to decline in the range of 100-150 bps due to estimated impacts from one-time charges with respect to the Nutranext acquisition. Also, it reflects higher logistics and commodity expenses.
For fiscal 2018, the company envisions effective tax rate of 22-23% compared with 23-24% guided earlier.
Consequently, management now anticipates fiscal 2018 earnings from continuing operations to be in the range of $6.15-$6.30 per share, down from the previous guidance of $6.17-$6.37 per share. The Zacks Consensus Estimate is pegged at $6.17, which is likely to witness downtrend in the coming days.
Clorox currently carries a Zacks Rank #4 (Sell). Shares of the company have lost 9% in the past month, wider than the industry’s decline of 5.2%.
Want Top-Ranked Consumer Staples Stocks? Check These
United Natural Foods, Inc. (UNFI - Free Report) , with a long-term earnings growth rate of 8.2%, has pulled off an average positive earnings surprise of 10.7% in the trailing four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Calavo Growers, Inc. (CVGW - Free Report) has a Zacks Rank #2 and delivered an average positive earnings surprise of 31.6% in the trailing four quarters.
Limoneira Company (LMNR - Free Report) , also a Zacks Rank #2 stock, has pulled off an average positive earnings surprise of 14.1% in the trailing four quarters.
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Clorox (CLX) Q3 Earnings Beats Estimates, Trims '18 EPS View
The Clorox Company (CLX - Free Report) posted impressive third-quarter fiscal 2018 results, surpassing the Zacks Consensus Estimate on both counts. Earnings and revenues also improved on a year-over-year basis. This marks the company’s sixth straight quarter of earnings beat, with sales returning to positive after a miss in the previous quarter.
Q3 Highlights
Quarterly earnings from continuing operations of $1.37 per share were up 5% year over year and surpassed the Zacks Consensus Estimate of $1.30. The bottom line primarily gained from higher sales and lower effective tax rate, offset by contraction in gross margin.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company Price, Consensus and EPS Surprise | The Clorox Company Quote
Net sales of $1,517 million advanced nearly 2.7% year over year and marginally came ahead of the Zacks Consensus Estimate of $1,511 million. Top-line growth can be attributed to improvement across all the company’s segments as well as 2020 Strategy, which focuses on boosting growth for the improvement of categories and overall market share. Also, volume growth of 3% in the quarter along with higher prices aided the increase in revenues. The uptick was somewhat compensated with adverse mix and negative impact from the sale of the Aplicare business.
Clorox witnessed significant pressure on gross margin, which contracted 120 basis points (bps) to 42.8% in the quarter. Lower margins can be attributed to elevated commodity and logistics expenses, which were partly mitigated with gains from cost savings and higher prices.
Revenue by Segment
Sales in the Cleaning segment improved 3% to $513 million, mainly driven by gains in Home Care, showing strength in Clorox disinfecting wipes along with the launch of Scentiva branded products. This was partly offset by fall in Professional Products business, particularly due to the sale of Aplicare business in August 2017.
Household sales inched up 1% to $493 million backed by double-digit gains in the Cat Litter business owing to broad-based business strength. This was partly offset with lower shipments in Charcoal owing to unfavorable weather throughout the quarter.
Sales at the Lifestyle segment improved 2% to $252 million driven by all-time record shipments of Hidden Valley bottled dressings and gains in the Natural Personal Care business. The upside was negated by lower shipments in Water Filtration due to a timing shift in the merchandising activity.
At the International business segment, sales grew 4% to $259 million backed by improved pricing and increased volumes in Canada. However, these factors were offset by adverse mix and foreign currency exchange rates.
Financials
Clorox ended the quarter with cash and cash equivalents of $1,174 million, and long-term debt of $1,789 million. In the nine months of fiscal 2018, the company generated $574 million of net cash from continuing operations.
2018 Guidance
Clorox updated its guidance for fiscal 2018 to include the effects from the acquisition of Nutranext and revised tax rate.
The company now projects sales growth of nearly 3% compared with the earlier guided range of 1-3%. The guidance includes contribution of 1 point from the Nutranext acquisition and an estimated 3 points gain from product innovation. Also, it includes nearly 1 point reduction in the fiscal year related to the Aplicare divestiture.
Gross margin is now estimated to decline in the range of 100-150 bps due to estimated impacts from one-time charges with respect to the Nutranext acquisition. Also, it reflects higher logistics and commodity expenses.
For fiscal 2018, the company envisions effective tax rate of 22-23% compared with 23-24% guided earlier.
Consequently, management now anticipates fiscal 2018 earnings from continuing operations to be in the range of $6.15-$6.30 per share, down from the previous guidance of $6.17-$6.37 per share. The Zacks Consensus Estimate is pegged at $6.17, which is likely to witness downtrend in the coming days.
Clorox currently carries a Zacks Rank #4 (Sell). Shares of the company have lost 9% in the past month, wider than the industry’s decline of 5.2%.
Want Top-Ranked Consumer Staples Stocks? Check These
United Natural Foods, Inc. (UNFI - Free Report) , with a long-term earnings growth rate of 8.2%, has pulled off an average positive earnings surprise of 10.7% in the trailing four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Calavo Growers, Inc. (CVGW - Free Report) has a Zacks Rank #2 and delivered an average positive earnings surprise of 31.6% in the trailing four quarters.
Limoneira Company (LMNR - Free Report) , also a Zacks Rank #2 stock, has pulled off an average positive earnings surprise of 14.1% in the trailing four quarters.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>