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The Clorox Company (CLX - Free Report) reported third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and our estimate. Sales and earnings rose year over year. Despite cost inflation, results benefited from a solid innovation pipeline, digital transformation, pricing and cost-saving efforts.
CLX has been on track with its streamlined operating model, which aims to improve efficiency. The company also launched products through third-party partnerships in Burt's Bees and Glad.
Shares of the Zacks Rank #2 (Buy) company have gained 12.1% in the past year compared with the industry’s 4.5% growth.
Image Source: Zacks Investment Research
Q3 Details
Adjusted earnings of $1.51 per share improved 15% year over year and beat the Zacks Consensus Estimate and our estimate of $1.20. Earnings benefited from pricing gains and cost savings, negated by increased advertising investments, higher selling and administrative expenses, and a rise in commodity costs.
Net sales of $1,915 million rose 6% from the year-ago quarter and surpassed the Zacks Consensus Estimate of $1,826 million and our estimate of $1,804.5 million. On an organic basis, sales improved 8%. The increase in sales was attributed to a favorable price mix, partly offset by lower volume. The company witnessed organic sales growth in all four segments, driven by improved service levels.
The gross margin expanded 590 bps year over year to 41.8% in the fiscal third quarter. Gains from pricing and cost-saving initiatives were offset by elevated manufacturing and logistic costs and higher commodity costs. It also marked the second consecutive quarter of a gross margin expansion on the back of cost pricing and high cost savings.
Segmental Discussion
Sales of the Health and Wellness segment grew 7% to $707 million. The downside was led by a 23-point gain from a favorable price mix, offset by a 16-point decline in volume.
The Household segment’s sales improved 2% to $550 million. The increase in sales for the segment can be attributed to 14 points of pricing gains offset by 12 points of volume decline.
Sales in the Lifestyle segment rose 15% year over year to $353 million, driven by a favorable price mix.
In the International segment, sales of $305 million were up 1% year over year, driven by a 21-point gain from a favorable price mix, offset by a volume decline of 7 points and a 13-point impact from unfavorable currency. Organic sales for the segment improved 14%.
Financials
Clorox ended third-quarter fiscal 2023 with cash and cash equivalents of $242 million, and long-term debt of $2,476 million. As of Mar 31, 2023, the company generated $728 million of net cash from operations.
The Clorox Company Price, Consensus and EPS Surprise
For fiscal 2023, the company envisions year-over-year net sales growth of 1-2% compared with the prior mentioned down 2% and up 1%. Organic sales are anticipated to increase 3-4% versus flat to up 3% mentioned earlier. Currency headwinds are likely to impact sales by 2% in fiscal 2023.
The gross margin is expected to increase 250-300 bps in fiscal 2023 compared with the prior mentioned 200 bps, driven by the combined benefits of pricing actions, cost savings and supply-chain-optimization efforts, offset by continued cost inflation. The company expects selling and administrative expenses to be 16% of sales compared with the earlier stated 15-16%, including 1.5 points of impact from its strategic investments in digital capabilities and productivity enhancements.
Clorox anticipates advertising and sales promotion spending to be 10% of sales, driven by its commitment to investing in its brand portfolio. The effective tax rate is likely to be 37% compared with the prior mentioned 24%. Also, the adjusted tax rate is likely to be 24% in fiscal 2023.
The company expects adjusted earnings of $4.35-$4.50 per share for fiscal 2023 compared with the $4.05-$4.30 stated earlier. The guidance suggests a year-over-year increase of 6-10%.
On a GAAP basis, earnings per share are anticipated to be 45-60 cents, suggesting a decline of 88-84% from the year-ago period’s reported number. Earlier, the company anticipated GAAP earnings of $3.20-$3.45, indicating a decline of 14-8% .
For the streamlined operating model program, it expects $75-$100 million in ongoing annual savings and $75-$100 million in one-time costs over fiscal 2023 and 2024. For fiscal 2023, savings from this plan are likely to be $35 million compared with the previously year over yearstated $25 million.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Procter & Gamble (PG - Free Report) , Colgate-Palmolive (CL - Free Report) and Church & Dwight Co. (CHD - Free Report) .
Procter & Gamble currently carries a Zacks Rank #2. PG has a trailing four-quarter earnings surprise of 1.02%, on average. It has a long-term earnings growth rate of 6.1%. The company has gained 0.2% in the past year.
The Zacks Consensus Estimate for Procter & Gamble’s current financial-year sales and earnings per share suggests growth of 1.3% and 0.9%, respectively, from the year-ago reported numbers. The consensus mark for PG’s earnings per share has moved up by a penny in the past seven days.
Colgate currently has a Zacks Rank of 2. CL has a trailing four-quarter earnings surprise of 1.4%, on average. It has a long-term earnings growth rate of 6.2%. The company has risen 8.3% in the past year.
The Zacks Consensus Estimate for Colgate’s current financial-year sales and earnings suggests growth of 2.6% and 4.7%, respectively, from the prior year’s reported numbers. The consensus mark for CL’s earnings per share has moved up by a penny in the past 30 days.
Church & Dwight currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 7.6%. CHD has a trailing four-quarter earnings surprise of 9.8%, on average. The company has gained 1% in the past year.
The Zacks Consensus Estimate for Church & Dwight’s current financial-year sales and earnings suggests growth of 5.9% and 4%, respectively, from the year-ago reported numbers. The consensus mark for CHD’s earnings per share has moved up by a penny in the past seven days.
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Clorox (CLX) Beats Q3 Earnings & Sales Estimates, Ups View
The Clorox Company (CLX - Free Report) reported third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and our estimate. Sales and earnings rose year over year. Despite cost inflation, results benefited from a solid innovation pipeline, digital transformation, pricing and cost-saving efforts.
CLX has been on track with its streamlined operating model, which aims to improve efficiency. The company also launched products through third-party partnerships in Burt's Bees and Glad.
Shares of the Zacks Rank #2 (Buy) company have gained 12.1% in the past year compared with the industry’s 4.5% growth.
Image Source: Zacks Investment Research
Q3 Details
Adjusted earnings of $1.51 per share improved 15% year over year and beat the Zacks Consensus Estimate and our estimate of $1.20. Earnings benefited from pricing gains and cost savings, negated by increased advertising investments, higher selling and administrative expenses, and a rise in commodity costs.
Net sales of $1,915 million rose 6% from the year-ago quarter and surpassed the Zacks Consensus Estimate of $1,826 million and our estimate of $1,804.5 million. On an organic basis, sales improved 8%. The increase in sales was attributed to a favorable price mix, partly offset by lower volume. The company witnessed organic sales growth in all four segments, driven by improved service levels.
The gross margin expanded 590 bps year over year to 41.8% in the fiscal third quarter. Gains from pricing and cost-saving initiatives were offset by elevated manufacturing and logistic costs and higher commodity costs. It also marked the second consecutive quarter of a gross margin expansion on the back of cost pricing and high cost savings.
Segmental Discussion
Sales of the Health and Wellness segment grew 7% to $707 million. The downside was led by a 23-point gain from a favorable price mix, offset by a 16-point decline in volume.
The Household segment’s sales improved 2% to $550 million. The increase in sales for the segment can be attributed to 14 points of pricing gains offset by 12 points of volume decline.
Sales in the Lifestyle segment rose 15% year over year to $353 million, driven by a favorable price mix.
In the International segment, sales of $305 million were up 1% year over year, driven by a 21-point gain from a favorable price mix, offset by a volume decline of 7 points and a 13-point impact from unfavorable currency. Organic sales for the segment improved 14%.
Financials
Clorox ended third-quarter fiscal 2023 with cash and cash equivalents of $242 million, and long-term debt of $2,476 million. As of Mar 31, 2023, the company generated $728 million of net cash from operations.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote
Fiscal 2023 Guidance
For fiscal 2023, the company envisions year-over-year net sales growth of 1-2% compared with the prior mentioned down 2% and up 1%. Organic sales are anticipated to increase 3-4% versus flat to up 3% mentioned earlier. Currency headwinds are likely to impact sales by 2% in fiscal 2023.
The gross margin is expected to increase 250-300 bps in fiscal 2023 compared with the prior mentioned 200 bps, driven by the combined benefits of pricing actions, cost savings and supply-chain-optimization efforts, offset by continued cost inflation. The company expects selling and administrative expenses to be 16% of sales compared with the earlier stated 15-16%, including 1.5 points of impact from its strategic investments in digital capabilities and productivity
enhancements.
Clorox anticipates advertising and sales promotion spending to be 10% of sales, driven by its commitment to investing in its brand portfolio. The effective tax rate is likely to be 37% compared with the prior mentioned 24%. Also, the adjusted tax rate is likely to be 24% in fiscal 2023.
The company expects adjusted earnings of $4.35-$4.50 per share for fiscal 2023 compared with the $4.05-$4.30 stated earlier. The guidance suggests a year-over-year increase of 6-10%.
On a GAAP basis, earnings per share are anticipated to be 45-60 cents, suggesting a decline of 88-84% from the year-ago period’s reported number. Earlier, the company anticipated GAAP earnings of $3.20-$3.45, indicating a decline of 14-8% .
For the streamlined operating model program, it expects $75-$100 million in ongoing annual savings and $75-$100 million in one-time costs over fiscal 2023 and 2024. For fiscal 2023, savings from this plan are likely to be $35 million compared with the previously year over yearstated $25 million.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Procter & Gamble (PG - Free Report) , Colgate-Palmolive (CL - Free Report) and Church & Dwight Co. (CHD - Free Report) .
Procter & Gamble currently carries a Zacks Rank #2. PG has a trailing four-quarter earnings surprise of 1.02%, on average. It has a long-term earnings growth rate of 6.1%. The company has gained 0.2% in the past year.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Procter & Gamble’s current financial-year sales and earnings per share suggests growth of 1.3% and 0.9%, respectively, from the year-ago reported numbers. The consensus mark for PG’s earnings per share has moved up by a penny in the past seven days.
Colgate currently has a Zacks Rank of 2. CL has a trailing four-quarter earnings surprise of 1.4%, on average. It has a long-term earnings growth rate of 6.2%. The company has risen 8.3% in the past year.
The Zacks Consensus Estimate for Colgate’s current financial-year sales and earnings suggests growth of 2.6% and 4.7%, respectively, from the prior year’s reported numbers. The consensus mark for CL’s earnings per share has moved up by a penny in the past 30 days.
Church & Dwight currently has a Zacks Rank #2 and an expected long-term earnings growth rate of 7.6%. CHD has a trailing four-quarter earnings surprise of 9.8%, on average. The company has gained 1% in the past year.
The Zacks Consensus Estimate for Church & Dwight’s current financial-year sales and earnings suggests growth of 5.9% and 4%, respectively, from the year-ago reported numbers. The consensus mark for CHD’s earnings per share has moved up by a penny in the past seven days.