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Here Are the Factors Influencing Clorox's (CLX) Q4 Earnings

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The Clorox Company (CLX - Free Report) is slated to report fourth-quarter fiscal 2020 results on Aug 3, before market open. In the last reported quarter, this Oakland, CA-based manufacturer and marketer of consumer products delivered an earnings surprise of 9.9%. Moreover, it delivered an earnings surprise of 6.6%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s fiscal fourth-quarter earnings is pegged at $2.00 per share, suggesting 6.4% growth from the year-ago quarter’s reported figure. The consensus mark has moved up by 1% in the past 30 days. For fiscal fourth-quarter revenues, the consensus mark is pegged at $1.85 billion, suggesting 13.9% growth from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for fiscal 2020 earnings per share stands at $6.92, suggesting a rise of 9.5% from the year-ago period’s reported figure. The consensus mark for revenues stands at $6.6 billion.

Factors to Note

Clorox has been gaining from increased demand for hand sanitizers, disinfecting wipes, and other floor and house-cleaning products since the onset of the COVID-19 pandemic. Driven by this sudden spike in demand, management in its last earnings call raised its view for fiscal 2020. Notably, management had projected sales growth of 4-6%, with organic sales growth of 6-8%. Moreover, fiscal 2020 earnings per share are anticipated to be $6.70-$6.90.

Further, it has been progressing well with its IGNITE Strategy, which focuses on maximizing opportunities in the core international business and increasing the demand for more sustainable products, such as new Clorox compostable cleaning wipes. It has also been concentrating on pricing and cost-containment efforts.

Backed by the IGNITE strategy, the company aims at higher cost savings annually by emphasizing more on technology and integrated designs. In its last earnings call, the company had envisioned its annual cost savings to exceed the target of 150 bps by the end of fiscal 2020. Moreover, robust sales and cost savings are likely to have benefited gross margins in the fiscal fourth quarter.

However, Clorox is reeling under elevated costs stemming from higher incentive compensation. In its last earnings call, selling and administrative expenses were projected to be nearly 15% of sales in fiscal 2020. Moreover, temporary investments related to employees and operational safety measures might have hurt the fiscal 2020 gross margin to some extent. Apart from these, major foreign currency headwinds have been weighing on the company’s performance. In fact, unfavorable foreign currency was expected to affect the fiscal 2020 sales view to the tune of about 2 percentage points.

Zacks Model

Our proven model does not predict an earnings beat for Clorox this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Clorox has a Zacks Rank #2 but an Earnings ESP of -0.25%, which makes surprise prediction difficult.

The Clorox Company Price and EPS Surprise

3 Stocks With a Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Medifast, Inc. (MED - Free Report) presently has an Earnings ESP of +2.53% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rankstocks here.

Procter Gamble Company (PG - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank #2, at present.

BGS Foods (BGS - Free Report) currently has an Earnings ESP of +1.56% and a Zacks Rank #2.

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