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Clorox (CLX) in Troubled Waters: What's Hurting the Stock?
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The Clorox Company (CLX - Free Report) , which had sort of settled in the green territory, has seen its shares slide recently. Evidently, this consumer goods big-wig has seen its stock decline 5.1% on a year-to-date basis, as against the Zacks categorized Soap and Cleaning Preparations industry’s growth of 1.4%. So, let’s see what lies behind Clorox’s sudden shift to the red zone.
One of the biggest hurdles in Clorox’s path is its significant international presence, which exposes it to major foreign currency risks. The company’s results are being harmed by these headwinds for a while now, and management expects the unfavorable currency fluctuations to persist in fiscal 2017.
Moreover, being heavily dependent on consumer sentiment, Clorox fell prey to the slowdown in some key global economies. In fact, the company expects the challenging macroeconomic environment, together with heightened competition and currency woes to hamper fiscal 2017 sales, as was reflected in management’s outlook following its first-quarter fiscal 2017 results.
A look at Clorox’s quarterly performance reveals that the company’s first quarter earnings marked its second consecutive miss. This was due to persistent currency headwinds and higher manufacturing and logistics expenses that more than offset the benefits from solid sales and cost savings. Further, these factors weighed upon Clorox’s gross margin, which contracted 60 basis points to 44.4% in the quarter.
Following the quarter, management also tweaked its earnings guidance for fiscal 2017, including the ASU 2016-09 benefit, stemming from the new accounting standard adopted recently. Incidentally, management 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 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.
Together, these factors led to a downtrend in its Zacks Consensus Estimate for the second quarter and fiscal 2017, which has dropped 2.4% to $1.23 and 3.3% to $5.33, respectively, over the past 60 days. Nonetheless, excluding the benefit from the new accounting standard, the company reiterated its earnings per share (EPS) guidance range of $5.13–$5.28 for fiscal 2017.
Apart from the aforementioned factors, stiff competition from well-established consumer product players raises threat for Clorox as the failure to offer high-quality products at competitive prices may dent its overall performance.
While these factors make Clorox a Zacks Rank #4 (Sell), investors can count on better-ranked consumer staples stocks like Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , with a Zacks Rank #1 (Strong Buy), Blue Buffalo Pet Products, Inc. (BUFF - Free Report) and Edgewell Personal Care Company (EPC - Free Report) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank 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 18.9% and positive estimate revisions over the past 30 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 14%, has seen positive estimate revisions for 2016, over the past 60 days. The company also flaunts a solid earnings surprise history.
Edgewell Personal Care, with a long-term EPS growth rate of 8.1%, has an average positive earnings surprise of 0.5% over the trailing four quarters.
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Clorox (CLX) in Troubled Waters: What's Hurting the Stock?
The Clorox Company (CLX - Free Report) , which had sort of settled in the green territory, has seen its shares slide recently. Evidently, this consumer goods big-wig has seen its stock decline 5.1% on a year-to-date basis, as against the Zacks categorized Soap and Cleaning Preparations industry’s growth of 1.4%. So, let’s see what lies behind Clorox’s sudden shift to the red zone.
One of the biggest hurdles in Clorox’s path is its significant international presence, which exposes it to major foreign currency risks. The company’s results are being harmed by these headwinds for a while now, and management expects the unfavorable currency fluctuations to persist in fiscal 2017.
Moreover, being heavily dependent on consumer sentiment, Clorox fell prey to the slowdown in some key global economies. In fact, the company expects the challenging macroeconomic environment, together with heightened competition and currency woes to hamper fiscal 2017 sales, as was reflected in management’s outlook following its first-quarter fiscal 2017 results.
A look at Clorox’s quarterly performance reveals that the company’s first quarter earnings marked its second consecutive miss. This was due to persistent currency headwinds and higher manufacturing and logistics expenses that more than offset the benefits from solid sales and cost savings. Further, these factors weighed upon Clorox’s gross margin, which contracted 60 basis points to 44.4% in the quarter.
Following the quarter, management also tweaked its earnings guidance for fiscal 2017, including the ASU 2016-09 benefit, stemming from the new accounting standard adopted recently. Incidentally, management 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 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.
Together, these factors led to a downtrend in its Zacks Consensus Estimate for the second quarter and fiscal 2017, which has dropped 2.4% to $1.23 and 3.3% to $5.33, respectively, over the past 60 days. Nonetheless, excluding the benefit from the new accounting standard, the company reiterated its earnings per share (EPS) guidance range of $5.13–$5.28 for fiscal 2017.
CLOROX CO Price and Consensus
CLOROX CO Price and Consensus | CLOROX CO Quote
Apart from the aforementioned factors, stiff competition from well-established consumer product players raises threat for Clorox as the failure to offer high-quality products at competitive prices may dent its overall performance.
While these factors make Clorox a Zacks Rank #4 (Sell), investors can count on better-ranked consumer staples stocks like Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , with a Zacks Rank #1 (Strong Buy), Blue Buffalo Pet Products, Inc. (BUFF - Free Report) and Edgewell Personal Care Company (EPC - Free Report) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank 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 18.9% and positive estimate revisions over the past 30 days help it stand strong against the industry.
Blue Buffalo, with a long-term EPS growth rate of 14%, has seen positive estimate revisions for 2016, over the past 60 days. The company also flaunts a solid earnings surprise history.
Edgewell Personal Care, with a long-term EPS growth rate of 8.1%, has an average positive earnings surprise of 0.5% over the trailing four quarters.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>