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Shares of The Clorox Company (CLX - Analyst Report) reached a new 52-week high of $76.77 on Monday, Jan 14, 2013, beating its previous 52-week high of $76.74. The closing price of this global consumer product company on Jan 14, 2013, was $76.60, representing a solid return of 17.4% since Jan 3, 2012. Average volume of shares traded over the last 3 months stands at approximately 953,497.
An impressive record of beating the quarterly earnings expectations, a positive fiscal 2013 outlook, and a decent dividend yield, are the major growth drivers for the shares of Clorox.
With respect to earnings surprise, Clorox has been beating the quarterly earnings expectations for the last eight quarters, most recently topping by 6.3% in its fiscal 2013 first quarter.
On Oct 31, 2012, Clorox reported first-quarter fiscal 2013 earnings per share of $1.01, ahead of the Zacks Consensus Estimate of 95 cents. Moreover, it remained flat year over year. The company’s earnings benefited from improved revenue as well as gross margins, but offset by higher selling and administration expenses as the company continues to invest in information technology (IT) systems.
Net sales elevated 2.5% year over year to $1,338 million from $1,305 million in the year-ago quarter, mainly on account of improved prices, offset in part by lower volumes and unfavorable foreign exchange.
Looking ahead, Clorox reiterated its sales growth forecast of 2%–4% for fiscal 2013, driven by better categories growth, market share gains and further product innovation across its brands. The company expects operating income margin to expand by 25 to 50 basis points in fiscal 2013, on the back of strong cost savings, the benefit of price increases and improved forecasts for commodity costs. Moreover, Clorox continues to expect earnings in the range of $4.20– $4.35 in fiscal 2013.
Clorox rewards its shareholders through regular quarterly dividends and increasing the same. In November 2012, the company announced a quarterly dividend of 64 cents per share, payable on Feb 15, 2013 to the shareholders of record as on Jan 23, 2013. This currently yields a solid 2.56%, while the company has a payout ratio of 59%.
Since 1983, the company has increased its dividend by over 600 times from 1.875 cents to 64 cents. We believe that its continuous dividend payment and increments reflects its earnings growth capacity and cash flow generation.
Valuation is Attractive
Clorox currently trades at a forward P/E of 17.81x, slightly above the peer group average of 17.69x. Again, its price-to-sales ratio of 1.82 is in line with the peer group average. Moreover, the company’s return-on-investment (ROI) and return-on-asset (ROA) are 32.3% and 12.5%, respectively, which are significantly higher than the peer group average. Given the company’s compelling fundamentals and earnings surprise history in the last eight quarters, we believe that its EPS growth will be higher than the long-term expected growth of 8.4%.
About The Company
Headquartered in Oakland, California, Clorox is primarily engaged in the production, marketing and sale of consumer products in the U.S. and international markets. The company sells its products primarily through mass merchandisers, grocery stores and other retail outlets. Clorox markets some of the most trusted and recognized brands, including its namesake bleach and cleaning products. The company manufactures products in more than 24 countries and markets them in more than 100 countries. The company has a market cap of approximately $9.99 billion.
Clorox, which competes with Colgate-Palmolive Company (CL - Analyst Report) and Procter & Gamble Company (PG - Analyst Report), currently holds Zacks Rank #3 (Hold) rating. Moreover, we are maintaining a long-term ‘Neutral’ recommendation on the stock.