The Clorox Company (CLX - Free Report) has seen persistent growth in over five years making it a dependable bet in all market situations. Recording a year-to-date growth of nearly 5%, the stock has lived up to its growth trend that reflects an over 24% growth in the past year and a solid 100.8% growth in 5 years. Also, this leading consumer goods company hit a 52-week high of $133.38 in yesterday’s trade, before closing a notch below at $133.11.
The stock’s potential is proven by its solid brand portfolio, unique expansion plans, efficient capital allocation and impressive earnings history. We believe Clorox's diversified brand portfolio positions the company well above its peers to generate above-average industry growth and sustain itself in the current challenging environment. The company’s approach to brand management allows each of its brands to develop further, through rigorous research and development, marketing strategies, financial control and operating leverage.
Coming to earnings, Clorox reported outstanding results for third-quarter fiscal 2016, with both top and bottom lines improving year over year, in addition to surpassing estimates. While earnings were backed by solid sales and gross margin growth, sales were fuelled by improved volumes and pricing. Margins in the quarter gained from efficient cost savings, greater productivity, lower commodity costs and improved pricing.
Notably, this marked Clorox’s fourth consecutive earnings beat, with an average positive surprise of 9.1%.
Despite facing a tough macro environment, management remains optimistic about its cost savings, brand investment and demand creation strategies, which encouraged it to raise its earnings per share and sales forecast for fiscal 2016. The company also expects its margins to remain strong in the future. Overall, management’s confidence in its core business strategies, progress of the 2020 Strategy, and encouraging outlook reflect an immense future potential.
Clorox has always maintained a disciplined capital allocation strategy, focused on making investments to develop its business while using the excess cash to lower debts and enhance its shareholder returns through dividend payouts and share buybacks.
However, this Zacks Rank #3 (Hold) stock’s significant international presence exposes it to major foreign currency risks, which also hurt its results in the third quarter to some extent. Though the company remains confident of its core business strategies, it expects the unfavorable currency fluctuations to weigh on its fiscal 2016 performance. This is reflected by management’s outlook, wherein it expects these headwinds, together with heightened competition and slowing global economies to impact fiscal 2016 sales. Intense competition and high trade spending are also concerns.
Beside Clorox, The J. M. Smucker Company (SJM - Free Report) , General Mills, Inc. (GIS - Free Report) and Energizer Holdings, Inc. (ENR - Free Report) have also hit new 52-Week High of $145.83, $65.79 and $49.81, respectively.
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