A month has gone by since the last earnings report for Clorox (
CLX Quick Quote CLX - Free Report) . Shares have added about 16.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Clorox due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Pricing Aids Clorox's Q1 Earnings Amid Cyberattack Woes
Clorox reported first-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate but declined year over year. Results were mainly impacted by lower volumes resulting from the cyberattack that occurred in August.
Adjusted earnings of 49 cents per share declined 47% year over year. Yet, the bottom line beat the Zacks Consensus Estimate of a loss of 20 cents. Results also surpassed the company’s preliminary bottom-line expectations between a loss of 40 cents and breakeven.
Adjusted earnings excluded one-time costs related to the recent cyberattack incident, and ongoing digital capabilities and productivity enhancements investment of 15 cents and 17 cents, respectively. On a GAAP basis, the company reported earnings of 17 cents per share, reflecting a plunge of 75% from 68 cents reported a year ago. On the preliminary results release, management anticipated a loss of 35-75 cents per share, on a GAAP basis. Net sales of $1,386 million decreased 20% from the year-ago quarter but surpassed the Zacks Consensus Estimate of $1,296 million. On an organic basis, sales fell 18% year over year. The downtick was mainly caused by lower volumes resulting from the cyberattack, partly negated by a favorable price mix. Gross margin expanded 240 bps year over year to 38.4% in the fiscal first quarter. Gains from pricing and cost-saving initiatives were offset by the impact of lower volume. The gross margin was significantly ahead of our projection of a 720-bps decline to 28.8% for the fiscal first quarter. Segmental Discussion
Sales of the Health and Wellness segment tumbled 23% to $504 million, which lagged our estimate of $512.5 million. This was due to a decline of 29 points in volume offset by 6 points gain from a favorable price mix. It reflected lower volumes and resulting revenue declines in both Cleaning and Professional Products businesses.
The Household segment’s sales declined 23% to $325 million but came ahead of our estimate of $296.1 million. The decrease resulted from 30 points decline in volume partly negated by 7 points gain from a favorable price mix. Each of the segment’s businesses, including Bags and Wraps, Cat Litter, and Grilling Bags, reported sales declines. Sales in the Lifestyle segment plunged 28% year over year to $229 million, which outpaced our estimate of $227.2 million. This was mainly driven by 37 points decline in volume offset by 9 points gain from a favorable price mix. The segment’s three businesses – Food, Natural Personal Care and Water Filtration Food – reported sales declines. In the International segment, sales of $270 million were down 5% year over year but outshined our estimate of $233.7 million. This was driven by a volume decline of 13 points and 14 points impact from unfavorable currency offset by 22 points gain from favorable price mix. Organic sales for the segment improved 9%. Financials
Clorox ended first-quarter fiscal 2024 with cash and cash equivalents of $518 million, and long-term debt of $2,478 million.
Fiscal 2024 Guidance
For fiscal 2024, management envisions net sales to decline mid-to-high single digits year over year. The sales decline is expected to reflect the impacts of the cyberattack. The guidance includes about 2 points of negative currency impact. Gross margin is projected to be flat due to the combined benefits of pricing actions, cost savings and supply-chain-optimization efforts. Continued input cost inflation and the cyberattack impacts are likely to offset the positives. CLX suggests selling and administrative expenses to be 16% of sales, including the impact of 2 points from its strategic investments in digital capabilities, implementation of the streamlined operating model and expenses incurred for the cyberattack.
Clorox anticipates advertising and sales promotion spending to be 11% of sales. This is likely to be driven by its commitment to investing in its brand portfolio. The effective tax rate is likely to be 23-24%. The company expects GAAP earnings of $2.10-$2.60 per share for fiscal 2024. The guidance suggests a year-over-year increase of 75-117%. On an adjusted basis, earnings per share are anticipated to be $4.30-$4.80, indicating a decline of 6-16% year over year. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 11.79% due to these changes.
Currently, Clorox has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Clorox has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Clorox is part of the Zacks Soap and Cleaning Materials industry. Over the past month, Colgate-Palmolive (
CL Quick Quote CL - Free Report) , a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended September 2023 more than a month ago.
Colgate-Palmolive reported revenues of $4.92 billion in the last reported quarter, representing a year-over-year change of +10.3%. EPS of $0.86 for the same period compares with $0.74 a year ago.
Colgate-Palmolive is expected to post earnings of $0.85 per share for the current quarter, representing a year-over-year change of +10.4%. Over the last 30 days, the Zacks Consensus Estimate has changed 0%.
Colgate-Palmolive has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.