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Clorox Stock Hits 52-Week High: Is it Time to Buy, Hold or Sell?
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Shares of The Clorox Company (CLX - Free Report) hit a new 52-week high of $167.75 yesterday before dropping just under 1% to close trading at $166.97. Moreover, the current stock price reflects a 146% premium from its 52-week low of $67.62.
Over the past three months, Clorox shares have surged 25.6%, outpacing the industry’s growth of 11.3% and the S&P 500’s 1.1% return. The stock also trades above its 50-day and 200-day moving averages, indicating strong investor confidence and a bullish market sentiment.
The recent upswing in Clorox's shares is driven by several key factors. The company has successfully navigated from the cyber-attack that occurred earlier in the year, restoring its supply and distribution and regaining across most of its markets where it lost share. This recovery was driven by a revitalized supply chain and robust merchandising efforts across its portfolio.
Additionally, Clorox made significant progress in advancing its IGNITE strategy, which focuses on growth and innovation. The company has completed the implementation of its streamlined operating model and strengthened digital transformation efforts, positioning itself for continued success in the evolving market landscape.
Let’s analyze whether Clorox will continue its recent positive momentum or if a pullback is likely ahead.
Image Source: Zacks Investment Research
Factors Driving Clorox’s Momentum
Clorox has completed the implementation of a streamlined operating model. This new structure is expected to generate ongoing annual cost savings of approximately $100 million, enhancing operational efficiency by a great margin.
The operating model helps to increase efficiencies and transform the company's operations in the areas of supply chain, digital commerce, innovation and brand building over the long term. The company has been strengthening its competitive advantage, accelerating profitable growth and preparing for long-term success while recovering from the cyber-attack witnessed earlier in the year.
Clorox is on track with the IGNITE strategy, which includes the long-term financial goals of 2-4% net sales growth, EBIT margin expansion of 25-50 basis points, and free cash flow generation of 11-13% of sales. Also, the company remains focused on delivering value superiority by making substantial investments in advertising and launching innovative products across its key brands.
Recent innovations from Clorox include the Clorox Toilet Bomb Foaming Toilet Bowl Cleaner and the Pine-Sol concentrated multi-surface cleaner. The company also launched the Brita Refillable Water Filtration System, seven new Hidden Valley Ranch flavors, and new fragrances in the Glad ForceFlex Scented Trash Bag lineup. These innovations underscore Clorox's commitment to boosting consumer value and brand loyalty through product diversification.
Additionally, the company's international business offers strong potential for long-term growth. The company is making good progress in its core international markets, leveraging the success of its Go Lean strategy to drive profitable growth. Guided by its IGNITE Strategy, which focuses on enhancing the profitability of the international segment, Clorox plans to make selective investments in profitable platforms. Management remains committed to exploring further international opportunities.
In line with its strategic focus, Clorox yesterday completed the sale of its Better Health Vitamins, Minerals, and Supplements business to Piping Rock Health Products. The sale forms a part of its strategy to focus on core areas and enhance shareholder value. The divestiture includes the Natural Vitality, NeoCell, Rainbow Light, and RenewLife brands, along with related trademarks, licenses, and manufacturing and distribution facilities in Sunrise, FL.
As a part of its digital endeavors, Clorox plans to invest $500 million in transformative technologies and processes in the next few years. This includes upgrading its enterprise resource planning (ERP) system, transitioning to a cloud-based platform, and implementing other digital technologies.
Of the $500 million, Clorox expects to record 55% as incremental operating costs within selling and administrative expenses, which will be adjusted from the reported EPS for adjusted EPS disclosure purposes. Approximately 70% of these costs will be related to the ERP implementation, with the rest associated with other technology upgrades.
What do Estimates Say About CLX?
Reflecting the positive sentiment around Clorox, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their current and next fiscal year estimates by 0.5% to $6.63 and by 0.1% to $6.98 per share, respectively. These estimates indicate expected year-over-year growth rates of around 7.5% and 5.4%, respectively.
Image Source: Zacks Investment Research
Near-term Challenges on Clorox’s Path
Clorox has encountered challenges from persistent inflation and changing market conditions, leading to a 6% year-over-year decline in net sales in fourth-quarter fiscal 2024. This downside is attributed to an unfavorable price mix, lower volumes, and the impact of the divestiture of the Argentina business. On an organic basis also, sales fell 3% year over year.
In fiscal 2025, management anticipates that continued consumer pressure will affect category growth, with net sales expected to be flat to down 2% from the prior year.
The company has been grappling with increased SG&A expenses due to accelerated investments in digital capabilities. In the fourth quarter of fiscal 2024, advertising expenses rose 26.1% year over year.
For fiscal 2025, management projects SG&A expense in the band of 15-16% of net sales, including an estimated 150 bps impact from investments in digital capabilities and productivity enhancements. Advertising and sales promotion spending is expected to be between 11% and 11.5% of net sales, reflecting the company's ongoing commitment to brand investment. Clorox’s gross margin expansion in fiscal 2025 may be partially offset by cost inflation and increased trade promotional expenses.
Clorox’s Premium Valuation
With the stock steadily on a steady rise, the company is trading at a forward 12-month P/E multiple of 25.12X, exceeding the industry average of 24.29X and the S&P 500’s average of 20.97X. Currently, Clorox’s stock valuation seems relatively expensive.
Investors should be cautious if the company's future performance does not meet expectations. The consumer goods market is becoming increasingly competitive, and CLX’s innovation and market expansion may not be enough to drive significant growth. We believe investors should wait for a better entry point for Clorox, which currently carries a Zacks Rank #3 (Hold).
Three Stocks to Consider
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse (CHEF - Free Report) , Pilgrim’s Pride (PPC - Free Report) and Ollie's Bargain Outlet (OLLI - Free Report) .
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, currently sports a Zacks Rank #1. PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average.
The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.43%, respectively, from the prior-year reported level.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.71%, respectively, from the year-earlier levels.
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Clorox Stock Hits 52-Week High: Is it Time to Buy, Hold or Sell?
Shares of The Clorox Company (CLX - Free Report) hit a new 52-week high of $167.75 yesterday before dropping just under 1% to close trading at $166.97. Moreover, the current stock price reflects a 146% premium from its 52-week low of $67.62.
Over the past three months, Clorox shares have surged 25.6%, outpacing the industry’s growth of 11.3% and the S&P 500’s 1.1% return. The stock also trades above its 50-day and 200-day moving averages, indicating strong investor confidence and a bullish market sentiment.
The recent upswing in Clorox's shares is driven by several key factors. The company has successfully navigated from the cyber-attack that occurred earlier in the year, restoring its supply and distribution and regaining across most of its markets where it lost share. This recovery was driven by a revitalized supply chain and robust merchandising efforts across its portfolio.
Additionally, Clorox made significant progress in advancing its IGNITE strategy, which focuses on growth and innovation. The company has completed the implementation of its streamlined operating model and strengthened digital transformation efforts, positioning itself for continued success in the evolving market landscape.
Let’s analyze whether Clorox will continue its recent positive momentum or if a pullback is likely ahead.
Image Source: Zacks Investment Research
Factors Driving Clorox’s Momentum
Clorox has completed the implementation of a streamlined operating model. This new structure is expected to generate ongoing annual cost savings of approximately $100 million, enhancing operational efficiency by a great margin.
The operating model helps to increase efficiencies and transform the company's operations in the areas of supply chain, digital commerce, innovation and brand building over the long term. The company has been strengthening its competitive advantage, accelerating profitable growth and preparing for long-term success while recovering from the cyber-attack witnessed earlier in the year.
Clorox is on track with the IGNITE strategy, which includes the long-term financial goals of 2-4% net sales growth, EBIT margin expansion of 25-50 basis points, and free cash flow generation of 11-13% of sales. Also, the company remains focused on delivering value superiority by making substantial investments in advertising and launching innovative products across its key brands.
Recent innovations from Clorox include the Clorox Toilet Bomb Foaming Toilet Bowl Cleaner and the Pine-Sol concentrated multi-surface cleaner. The company also launched the Brita Refillable Water Filtration System, seven new Hidden Valley Ranch flavors, and new fragrances in the Glad ForceFlex Scented Trash Bag lineup. These innovations underscore Clorox's commitment to boosting consumer value and brand loyalty through product diversification.
Additionally, the company's international business offers strong potential for long-term growth. The company is making good progress in its core international markets, leveraging the success of its Go Lean strategy to drive profitable growth. Guided by its IGNITE Strategy, which focuses on enhancing the profitability of the international segment, Clorox plans to make selective investments in profitable platforms. Management remains committed to exploring further international opportunities.
In line with its strategic focus, Clorox yesterday completed the sale of its Better Health Vitamins, Minerals, and Supplements business to Piping Rock Health Products. The sale forms a part of its strategy to focus on core areas and enhance shareholder value. The divestiture includes the Natural Vitality, NeoCell, Rainbow Light, and RenewLife brands, along with related trademarks, licenses, and manufacturing and distribution facilities in Sunrise, FL.
As a part of its digital endeavors, Clorox plans to invest $500 million in transformative technologies and processes in the next few years. This includes upgrading its enterprise resource planning (ERP) system, transitioning to a cloud-based platform, and implementing other digital technologies.
Of the $500 million, Clorox expects to record 55% as incremental operating costs within selling and administrative expenses, which will be adjusted from the reported EPS for adjusted EPS disclosure purposes. Approximately 70% of these costs will be related to the ERP implementation, with the rest associated with other technology upgrades.
What do Estimates Say About CLX?
Reflecting the positive sentiment around Clorox, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their current and next fiscal year estimates by 0.5% to $6.63 and by 0.1% to $6.98 per share, respectively. These estimates indicate expected year-over-year growth rates of around 7.5% and 5.4%, respectively.
Image Source: Zacks Investment Research
Near-term Challenges on Clorox’s Path
Clorox has encountered challenges from persistent inflation and changing market conditions, leading to a 6% year-over-year decline in net sales in fourth-quarter fiscal 2024. This downside is attributed to an unfavorable price mix, lower volumes, and the impact of the divestiture of the Argentina business. On an organic basis also, sales fell 3% year over year.
In fiscal 2025, management anticipates that continued consumer pressure will affect category growth, with net sales expected to be flat to down 2% from the prior year.
The company has been grappling with increased SG&A expenses due to accelerated investments in digital capabilities. In the fourth quarter of fiscal 2024, advertising expenses rose 26.1% year over year.
For fiscal 2025, management projects SG&A expense in the band of 15-16% of net sales, including an estimated 150 bps impact from investments in digital capabilities and productivity enhancements. Advertising and sales promotion spending is expected to be between 11% and 11.5% of net sales, reflecting the company's ongoing commitment to brand investment. Clorox’s gross margin expansion in fiscal 2025 may be partially offset by cost inflation and increased trade promotional expenses.
Clorox’s Premium Valuation
With the stock steadily on a steady rise, the company is trading at a forward 12-month P/E multiple of 25.12X, exceeding the industry average of 24.29X and the S&P 500’s average of 20.97X. Currently, Clorox’s stock valuation seems relatively expensive.
Investors should be cautious if the company's future performance does not meet expectations. The consumer goods market is becoming increasingly competitive, and CLX’s innovation and market expansion may not be enough to drive significant growth. We believe investors should wait for a better entry point for Clorox, which currently carries a Zacks Rank #3 (Hold).
Three Stocks to Consider
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse (CHEF - Free Report) , Pilgrim’s Pride (PPC - Free Report) and Ollie's Bargain Outlet (OLLI - Free Report) .
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, currently sports a Zacks Rank #1. PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average.
The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.43%, respectively, from the prior-year reported level.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.71%, respectively, from the year-earlier levels.