The Clorox Company (CLX Quick QuoteCLX - Free Report) has been favored by investors on the back of solid demand, cost-saving efforts, strong execution and pricing actions. Its IGNITE strategy and digital investments bode well.

An uptrend in the Zacks Consensus Estimate echoes the same sentiment. The consensus estimate for the current financial year has increased 2.3% to $4.44 over the past seven days. The company’s long-term earnings growth rate of 12.5% and  Growth Score of B highlights its inherent strength.

Let’s Delve Deeper

Clorox has been gaining from a solid innovation pipeline, digital transformation, pricing and cost-saving efforts. It has been on track with its streamlined operating model, which aims to improve efficiency. This led to the impressive third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate for the third straight quarter.

Adjusted earnings of $1.51 per share improved 15% year over year and surpassed 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 exceeded our estimate of $1,804.5 million. On an organic basis, sales improved 8%. Sales growth 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.

CLX is on track with the IGNITE strategy, which focuses on the expansion of the key elements under the 2020 Strategy to pace up innovation in each area of business. The IGNITE strategy encompasses the long-term financial targets of achieving net sales growth of 3-5%, an EBIT margin expansion of 25-50 bps and a free cash flow generation of 11-13% of sales.

Management announced a streamlined operating model to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. The operating model implemented in the first quarter of fiscal 2023 will help increase efficiencies and transform the company's operations in the areas of the supply chain, digital commerce, innovation, brand building and more over the long term.

The implementation of this new model is likely to be completed in fiscal 2024. The company expected the operating model to generate ongoing annual savings of $75-$100 million, with benefits likely to occur from fiscal 2023. Of this, the company expected $40-60 million or 30 cents per share to be recognized in fiscal 2023 under other income and expenses.

The company has been witnessing strong progress in the core International business as it continues to build on the success of the segment's Go Lean strategy. These efforts will help accelerate profitable growth for the segment. Driven by its IGNITE Strategy, which aims to improve profitability in International business, the company expects to invest selectively in profitable platforms.

CLX has been exploring international opportunities, including the acquisition of a majority stake in its joint venture in the Kingdom of Saudi Arabia. The company believes that the acquisition will boost long-term growth in the international segment. In third-quarter fiscal 2023, organic sales for the International segment improved 1%, whereas organic sales for the segment improved 14%.

Driven by these factors, it envisions 2023 year-over-year net sales growth of 1-2% compared with the prior mentioned 2% decline to 1% growth. Organic sales are anticipated to increase 3-4% versus flat to up 3% mentioned earlier. 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%. 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-saving and supply-
chain-optimization efforts, offset by continued cost inflation.

Image Source: Zacks Investment Research

Consequently, shares of this Zacks Rank #1 (Strong Buy) company have gained 10.2% in the past three months compared with the industry’s growth of 9%.

Other Stocks to Consider

We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Procter & Gamble (PG Quick QuotePG - Free Report) , Conagra Brands (CAG Quick QuoteCAG - Free Report) and Church & Dwight Co. (CHD Quick QuoteCHD - Free Report) .

Procter & Gamble currently carries a Zacks Rank #2 (Buy). PG has a trailing four-quarter earnings surprise of 1.02%, on average. It has a long-term earnings growth rate of 6.1%.

You can see the complete list of today’s Zacks #1 Rank 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.

Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average. It has a long-term earnings growth rate of 6.4%.

The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests improvements of 7.1% and 16.5%, respectively, from the year-ago reported numbers. The consensus mark for CAG’s earnings per share has moved up 3.4% 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 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.