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Clorox (CLX) Up More Than 23% in a Year: What You Should Know

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Shares of The Clorox Company (CLX - Free Report) have gained 23.5% in the past year, thanks to strength in its IGNITE strategy, which aims at driving overall growth and hence boosting shareholder value. Strong consumer demand for its products has been further boosting its performance. In fact, the company is likely to continue benefiting from elevated demand for cleansing products, including disinfecting items, amid the pandemic.

The company’s cost-containment actions and productivity initiatives also bode well. Notably, the cost-savings program has meaningfully contributed to year-over-year gross-margin expansion for the eighth consecutive time in first-quarter fiscal 2021. As a result, the Zacks Rank #3 (Hold) stock has outshined the industry’s 7.6% rally. The VGM Score of A and expected long-term earnings growth of 7.3% are added strengths.

Robust Strategies

Clorox is on track with its IGNITE strategy. This integrated strategy is formulated on a sturdy foundation of its 2020 strategy and mainly focuses on the expansion of key elements to pace up innovation in each area of business. Clorox has chalked out four strategic choices, namely, fuel growth; develop portfolio; innovate experiences; and reimagine operations.


 

Markedly, IGNITE’s main principle is ‘Innovating for Good Growth’, delivering sustainable and responsible growth. The strategy encompasses the long-term financial targets of achieving net sales growth of 2-4%, EBIT margin expansion of 25-50 basis points and free cash flow generation of 11-13% of sales. Moreover, the company is witnessing strong progress in the core International business. Driven by its IGNITE strategy that targets improving profitability in international business, the company expects to invest selectively in profitable platforms.

Although Clorox is seeing higher manufacturing and logistics expenses, including pandemic-related costs and increased selling and administrative expenses, its cost-controlling actions are noteworthy. Backed by the IGNITE strategy, Clorox aims at higher cost savings annually by emphasizing more on technology and integrated design. Further, the company’s cost-based pricing strategy has enabled it to address the inflationary environment. These cost-saving and pricing actions should continue to support its investment in brands and category growth.

What Awaits

The aforementioned factors is likely to help Clorox maintain its earnings surprise streak for the seventh straight quarter, when it reports second-quarter fiscal 2021 results on Feb 4. According to the Zacks Model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chance of an earnings beat to roughly 70%. Going by this, Clorox is likely to beat earnings estimates this reporting cycle. This is because the company presently has an Earnings ESP of +0.71% coupled with a favorable Zacks Rank. You can see the complete list of today’s Zacks #1 Rank stocks here.

In fact, the Zacks Consensus Estimate for the impending quarter’s earnings is currently pegged at $1.66, up 2 cents in the past 30 days and suggests an improvement of 13.7% from the year-ago quarter. Further, the Zacks Consensus Estimate for revenues is pegged at $1.74 billion for the fiscal second quarter, suggesting growth of more than 19% from the year-ago quarter’s tally.

Key Stocks to Consider

Church & Dwight (CHD - Free Report) has an expected long-term earnings growth rate of 9% and a Zacks Rank #2.

Procter & Gamble (PG - Free Report) has an expected long-term earnings growth rate of 7.9% and a Zacks Rank #2.

Colgate (CL - Free Report) , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 6.6% and a Zacks Rank #2.

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