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Can Clorox's (CLX) Q4 Earnings Keep its Solid Streak Alive?

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The Clorox Company (CLX - Free Report) is scheduled to release fourth-quarter fiscal 2016 results on Aug 3. Last quarter, the company had delivered a positive earnings surprise of 10%. In fact, the bottom line has outperformed the Zacks Consensus Estimate by an average of 9.1% over the trailing four quarters, with a beat in each quarter. Let’s see how things are shaping up for this announcement.

CLOROX CO Price and EPS Surprise

CLOROX CO Price and EPS Surprise | CLOROX CO Quote

Factors Influencing this Quarter

Clorox has been gaining from its cost saving and efficient pricing initiatives, which along with its 2020 Strategy have helped it to deliver upbeat results amid all challenges. Going forward, while management continues to expect fiscal 2016 to bear the brunt of adverse currency fluctuations, greater competition and sluggish global economies, it remains confident of its core business strategies. This also encouraged the company to raise its sales and earnings per share projections for fiscal 2016.

Clorox now expects fiscal 2016 sales growth in a range of 1%–2%, compared with a flat to 1% increase projected earlier. On a currency-neutral basis, sales growth is now anticipated to range from 4%–5%, as against the previous prediction of 3%–4%. Also, the company raised its fiscal 2016 earnings guidance to $4.85–$4.95 per share from $4.75–$4.90 envisioned earlier.

Earnings Whispers

Our proven model does not conclusively show that Clorox is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Clorox is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $1.28.

Zacks Rank: Clorox’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Jack in the Box Inc. JACK, expected to report earnings on Aug 3, currently has an Earnings ESP of +1.15% and a Zacks Rank #2 (Buy).

Hibbett Sports, Inc. HIBB, expected to report earnings on Aug 19, currently has an Earnings ESP of +3.70% and a Zacks Rank #3.

The Gap Inc. GPS, expected to report earnings on Aug 18, currently has an Earnings ESP of +2.13% and a Zacks Rank #3.

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