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Can Clorox (CLX) Retain its Earnings Beat Streak in Q1?

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The Clorox Company (CLX - Free Report) is slated to report first-quarter fiscal 2019 results on Oct 31.

A glimpse of the company’s earnings performance shows that it has delivered positive surprise in the trailing seven quarters. Further, it has pulled off an average positive earnings surprise of 3.7% in the last four quarters.

The Clorox Company Price, Consensus and EPS Surprise

The Clorox Company Price, Consensus and EPS Surprise | The Clorox Company Quote

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.59, which moved north by a penny over the last 30 days and reflects growth of 8.9% year over year. Let’s see how things are shaping prior to the earnings announcement.

Factors at Play

Clorox has been gaining from its solid growth initiatives, including 2020 Strategy, Go Lean Strategy, enhancement of e-commerce business and disciplined capital allocation. Also, the company is progressing well with the smooth execution of its 2020 Strategy, which is aimed at aiding the improvement of categories and boosting overall market share. These apart, management is well on track with its Go Lean Strategy to expand margins. In fact, it remains committed to investing in product and brand differentiation as well, in order to safeguard value proposition.

Furthermore, Clorox’s focus on solid investments, including digital marketing, e-commerce and product innovation pipeline is encouraging. Notably, these strategic actions have been aiding the company’s quarterly results, which is clear from its robust surprise trend over the past few quarters. Also, it delivered sales beat in three of the trailing five quarters. The Zacks Consensus Estimate for first-quarter revenues is $1,537 million, mirroring a 2.4% increase from the year-ago quarter number.

 

As a result, shares of Clorox have rallied 27.4% in the past six months, outperforming the industry’s 9.9% growth.

Despite gains from its cost saving and productivity initiatives, the company continues to witness significant pressure on gross margin, which too remains a major concern in the to-be-reported quarter. Management also anticipates increased cost pressures from commodities and the transportation market to weigh on margins. Although Clorox expects to witness gross margin expansion in the second half of fiscal 2019, the metric is likely to remain soft in the first half due to increased commodity expenses.

Nevertheless, Clorox’s commitment toward brand management and cost-saving efforts to improve margins and profitability is impressive. Also, management expects product innovation, and combined effect from the Nutranext acquisition and Aplicare divestiture to boost the top line and profitability.

What the Zacks Model Predicts

Our proven model does not conclusively show that Clorox is likely to beat earnings estimates in first-quarter fiscal 2019. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Clorox has a Zacks Rank #3. However, the company’s Earnings ESP of -0.99% lowers the chances of an earnings beat in the upcoming release.

Stocks With Favorable Combination

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:

Archer Daniels Midland Company (ADM - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Estee Lauder Companies Inc. (EL - Free Report) has an Earnings ESP of +1.19% and a Zacks Rank #3.

Monster Beverage Corporation (MNST - Free Report) has an Earnings ESP of +3.01% and a Zacks Rank #3.

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