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The Clorox Company (CLX - Free Report) released first-quarter fiscal 2017 results, wherein the bottom line marked its second consecutive miss. Also, the company tweaked its earnings guidance for fiscal 2017 (including the ASU 2016-09 benefit), which seemed to have upset investors, as is reflected by a 2.1% decline in its stock price during the pre-market trading hours. The top line, however, remained strong, thanks to robust volume growth across all segments.
Quarterly earnings from continuing operations of $1.36 per share jumped 3% year over year, but missed the Zacks Consensus Estimate of $1.42 as benefits from solid sales and cost savings were more than offset by currency headwinds and higher manufacturing and logistics expenses. Also, the bottom line includes a benefit of 4 cents related to the adoption of the Accounting Standards Update (ASU) 2016-09, as revealed earlier.
On the positive side, however, net sales of $1,443 million advanced nearly 4% year over year, surpassing the Zacks Consensus Estimate of $1,433 million. Notably, this marked the company’s third consecutive sales beat.
During the quarter, gains from 8% volume growth, higher pricing at the International business and benefits from RenewLife (acquired in May 2016) were somewhat negated by unfavorable mix and about 2% impact from unfavorable currency effects. On a currency-neutral basis, revenues increased 6% in the reported quarter.
However, Clorox’s gross margin contracted 60 basis points (bps) to 44.4% in the quarter, as greater manufacturing and logistics expenses; unfavorable mix and adverse currency movements more than offset the gains from efficient cost savings, lower commodity costs and improved pricing.
Revenue by Segment
Sales in the Cleaning segment improved 7% to $534 million, with a 13% jump in volumes. Volumes mainly benefited from the strength in Home Care brands, particularly Clorox disinfecting wipes coupled with strong volumes at the Professional Products’ cleaning brands.
Household sales grew 3% to $422 million, with volumes rising 6%. Volumes were mainly aided by the RenewLife acquisition, somewhat negated by lower shipments at Charcoal.
Sales at the Lifestyle segment rose 2% to $236 million, driven by 1% advancement in volumes, which in turn benefited from growth witnessed in Natural Personal Care.
In the International business segment, Clorox’s sales remained flat at $251 million, reflecting the negative impact of currency. On a currency-neutral basis, sales jumped 10% year over year. Volumes at the segment improved 4%, mainly driven by gains in Canada (including benefits from Renew Life’s buyout) and Asia, partly offset by weakness noted in some Latin American nations like Argentina.
Financials
Clorox ended the quarter with cash and cash equivalents of $408 million, and long-term debt of $1,789 million. During the first quarter, the company generated $170 million of net cash from continuing operations compared with $135 million in the year-ago period.
Management remains pleased with the strong start to fiscal 2017, which witnessed solid sales and volume growth across most segments, alongside delivering impressive gross margin – reflecting its focus on its 2020 Strategy. This strategy has been helping the company achieve cost savings and productivity enhancements. Going forward, the company remains on track to keep this momentum going. That said, management remains positive about the remainder of fiscal 2017 given its constant focus on its core business strategies.
However, management’s fiscal 2017 guidance takes into account a challenging macroeconomic environment and adverse currency movements, which may pose concerns.
Clorox continues to expect fiscal 2017 sales growth in a range of 2%–4%, including a positive impact from the RenewLife buyout of nearly 2 points and adverse currency impact of nearly the same amount. On a currency-neutral basis, sales growth is still anticipated to range from 4%–6% in the fiscal.
Further, EBIT margin is still estimated to expand in a band of 25–50 bps, mainly backed by lower selling and administrative costs.
However, given the adoption of ASU 2016-09, the company now anticipates effective tax rate for the fiscal in the range of 32%–33%, compared with 30%–31% projected earlier.
Management further stated that the ASU 2016-09 benefit is now expected to boost fiscal 2017 earnings by 10–15 cents per share compared with a gain of 25–30 cents per share expected earlier. Consequently, the company lowered its earnings forecast for fiscal 2017 to $5.23–$5.43 per share (including ASU benefit) from $5.38–$5.58 expected earlier.
However, excluding the benefit from the new accounting standard, the company reiterated its earnings per share guidance range of $5.13–$5.28 for fiscal 2017.
Ollie's Bargain has to its credit a spectacular earnings trend as the company delivered a positive earnings surprise over the past four quarters. Moreover, its long-term EPS growth rate of 20.2% and positive estimate revisions over the past 90 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 16%, has seen positive estimate revisions for 2016, over the past 90 days. The company also flaunts a solid earnings surprise history.
Spectrum Brands, with a long-term EPS growth rate of 13.3%, has delivered back-to-back positive earnings surprises in the last two quarters. Also, the company, which is expected to release earnings on Nov 17, has an Earnings ESP of +3.88%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises. Confidential from Zacks
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Clorox (CLX) Q1 Earnings Miss; Updates View; Stock Dips
The Clorox Company (CLX - Free Report) released first-quarter fiscal 2017 results, wherein the bottom line marked its second consecutive miss. Also, the company tweaked its earnings guidance for fiscal 2017 (including the ASU 2016-09 benefit), which seemed to have upset investors, as is reflected by a 2.1% decline in its stock price during the pre-market trading hours. The top line, however, remained strong, thanks to robust volume growth across all segments.
Quarterly earnings from continuing operations of $1.36 per share jumped 3% year over year, but missed the Zacks Consensus Estimate of $1.42 as benefits from solid sales and cost savings were more than offset by currency headwinds and higher manufacturing and logistics expenses. Also, the bottom line includes a benefit of 4 cents related to the adoption of the Accounting Standards Update (ASU) 2016-09, as revealed earlier.
On the positive side, however, net sales of $1,443 million advanced nearly 4% year over year, surpassing the Zacks Consensus Estimate of $1,433 million. Notably, this marked the company’s third consecutive sales beat.
During the quarter, gains from 8% volume growth, higher pricing at the International business and benefits from RenewLife (acquired in May 2016) were somewhat negated by unfavorable mix and about 2% impact from unfavorable currency effects. On a currency-neutral basis, revenues increased 6% in the reported quarter.
However, Clorox’s gross margin contracted 60 basis points (bps) to 44.4% in the quarter, as greater manufacturing and logistics expenses; unfavorable mix and adverse currency movements more than offset the gains from efficient cost savings, lower commodity costs and improved pricing.
Revenue by Segment
Sales in the Cleaning segment improved 7% to $534 million, with a 13% jump in volumes. Volumes mainly benefited from the strength in Home Care brands, particularly Clorox disinfecting wipes coupled with strong volumes at the Professional Products’ cleaning brands.
Household sales grew 3% to $422 million, with volumes rising 6%. Volumes were mainly aided by the RenewLife acquisition, somewhat negated by lower shipments at Charcoal.
Sales at the Lifestyle segment rose 2% to $236 million, driven by 1% advancement in volumes, which in turn benefited from growth witnessed in Natural Personal Care.
In the International business segment, Clorox’s sales remained flat at $251 million, reflecting the negative impact of currency. On a currency-neutral basis, sales jumped 10% year over year. Volumes at the segment improved 4%, mainly driven by gains in Canada (including benefits from Renew Life’s buyout) and Asia, partly offset by weakness noted in some Latin American nations like Argentina.
Financials
Clorox ended the quarter with cash and cash equivalents of $408 million, and long-term debt of $1,789 million. During the first quarter, the company generated $170 million of net cash from continuing operations compared with $135 million in the year-ago period.
CLOROX CO Price, Consensus and EPS Surprise
CLOROX CO Price, Consensus and EPS Surprise | CLOROX CO Quote
Looking Ahead
Management remains pleased with the strong start to fiscal 2017, which witnessed solid sales and volume growth across most segments, alongside delivering impressive gross margin – reflecting its focus on its 2020 Strategy. This strategy has been helping the company achieve cost savings and productivity enhancements. Going forward, the company remains on track to keep this momentum going. That said, management remains positive about the remainder of fiscal 2017 given its constant focus on its core business strategies.
However, management’s fiscal 2017 guidance takes into account a challenging macroeconomic environment and adverse currency movements, which may pose concerns.
Clorox continues to expect fiscal 2017 sales growth in a range of 2%–4%, including a positive impact from the RenewLife buyout of nearly 2 points and adverse currency impact of nearly the same amount. On a currency-neutral basis, sales growth is still anticipated to range from 4%–6% in the fiscal.
Further, EBIT margin is still estimated to expand in a band of 25–50 bps, mainly backed by lower selling and administrative costs.
However, given the adoption of ASU 2016-09, the company now anticipates effective tax rate for the fiscal in the range of 32%–33%, compared with 30%–31% projected earlier.
Management further stated that the ASU 2016-09 benefit is now expected to boost fiscal 2017 earnings by 10–15 cents per share compared with a gain of 25–30 cents per share expected earlier. Consequently, the company lowered its earnings forecast for fiscal 2017 to $5.23–$5.43 per share (including ASU benefit) from $5.38–$5.58 expected earlier.
However, excluding the benefit from the new accounting standard, the company reiterated its earnings per share guidance range of $5.13–$5.28 for fiscal 2017.
Zacks Rank
Clorox currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the consumer staples sector include Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , Blue Buffalo Pet Products, Inc. (BUFF - Free Report) and Spectrum Brands Holdings, Inc. (SPB - Free Report) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ollie's Bargain has to its credit a spectacular earnings trend as the company delivered a positive earnings surprise over the past four quarters. Moreover, its long-term EPS growth rate of 20.2% and positive estimate revisions over the past 90 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 16%, has seen positive estimate revisions for 2016, over the past 90 days. The company also flaunts a solid earnings surprise history.
Spectrum Brands, with a long-term EPS growth rate of 13.3%, has delivered back-to-back positive earnings surprises in the last two quarters. Also, the company, which is expected to release earnings on Nov 17, has an Earnings ESP of +3.88%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
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>>