Back to top

Analyst Blog

Zacks Equity Research

Clorox's (CLX) Growth Endeavors on Track Despite Hurdles


Trades from $3

The Clorox Company (CLX - Analyst Report) hasn’t left any corner untouched with regard to driving future growth. From its focus on innovations and 2020 Strategy, to its impressive brands and splendid earnings history, the company has all that it takes to demand investors’ attention.

Starting with its growth endeavors, we remain impressed with Clorox’s progress on its 2020 Strategy, which is aimed at boosting growth for the improvement of categories and overall market share. The smooth execution of this strategy has been helping the company achieve cost savings and productivity enhancements. All these factors also led to gross margin expansion in fiscal 2016.

Clorox possesses a diversified brand portfolio that positions the company well above its peers to generate above-average industry growth and sustain itself in the currently challenging environment. Further, the company’s approach to brand management allows each of its brands to develop further, through rigorous research and development (R&D), marketing strategies, financial control and operating leverage.

A look at the financial aspects reveals that 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.

Finally, analyzing Clorox’s past performance, we note that the company has surpassed earnings estimates in four of the past five quarters. Though earnings fell short of the consensus estimate by a couple of cents in fourth-quarter fiscal 2016, Clorox delivered a splendid top-line performance, backed by solid volume growth in all segments.

However, significant global presence exposes the company to foreign currency risks, which have been hurting its results for a while now. Going forward, these woes, tough year-over-year comparisons and a challenging macroeconomic environment may pose concerns.

Well, Clorox is not the only company to bear the brunt of currency headwinds. Evidently, another consumer goods company, Colgate-Palmolive Co. (CL - Analyst Report) is facing this hurdle, while popular retailers like The Gap Inc. (GPS - Analyst Report) and Bed Bath & Beyond Inc. (BBBY - Analyst Report) have also been suffering largely due to unfavorable currency fluctuations.

Coming back to Clorox, while currency woes and stiff competition remain hurdles in its path, the company’s key strategies, cost saving efforts and efficient pricing bode well, as these are likely to drive margins. These factors also led management to provide a robust sales and earnings outlook for fiscal 2017, as it remains confident of its core business strategies.

CLOROX CO Price and Consensus

CLOROX CO Price and Consensus | CLOROX CO Quote

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>