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Clorox (CLX) Appears Promising: What's Driving the Stock?
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The Clorox Company (CLX - Free Report) is currently witnessing a consumer boom stemming from the coronavirus situation, when most companies around the world have been badly hit by government restrictions and sheer panic among people. The novel coronavirus has been wreaking havoc since its onset, killing millions of people and putting the global economy on a standstill. The uncertainty caused by the pandemic has led to temporary store closures, furlough of employees, pay cuts, job losses, among others, which has dealt a blow to the economy.
As consumers focus on their personal hygiene owing to the spread of this deadly virus, demand for Clorox disinfectant products have sky-rocketed. Moreover, the demand increased after the Environmental Protection Agency listed it as one of the anti-microbial products that are effective against the coronavirus. To meet this growing demand of customers and healthcare workers, the company has increased production of disinfecting products. Also, it came out with a new 55-gallon bleach-drum for healthcare facilities in the United States, which can clean up to 14,000 hospital rooms.
Driven by strong growth in the disinfecting products and broad-based growth at all four segments, Clorox posted robust third-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate and grew year over year. Encouragingly, management raised view for fiscal 2020. This has led to the stock gaining 21.6% in the past three months against the industry’s decline of 1.3%.
For fiscal 2020, management now projects sales growth of 4-6% againsta low-single-digit decline to a 1% increase expected earlier. The raised guidance reflects expectations of gains from the COVID-19-related demand spike. It now expects organic sales growth of 6-8% versus the prior view of flat to up 2%. Moreover, gross margin is now estimated to rise substantially, reflecting continued gains from operating leverage, backed by robust sales and cost savings. Management now anticipates fiscal 2020 earnings per share of $6.70-$6.90, indicating a rise of 6-9% year over year. Earlier, it had envisioned earnings per share of $6.10-$6.25.
Apart from these, it remains on track with the IGNITE strategy, aimed at the expansion of the key elements under the 2020 Strategy to pace up innovation in each area of business. The IGNITE strategy mainly focuses on four strategic areas — fueling growth through brand reinvestments, innovating to deliver enhanced customer experience, developing product portfolio and re-imagining the company’s operations. Driven by these, management expects to achieve long-term financial targets, including net sales growth of 2-4%, EBIT margin expansion of 25-50 basis points (bps) and free cash flow generation to be 11-13% of sales.
Additionally, Clorox aims at increasing cost-savings annually by emphasizing more on technology and integrated design. With this, it expects to achieve EBIT margin expansion of 175 basis points annually. Such cost-saving and pricing actions should continue to support its investments in long-term brands and category growth.
Summing Up
As Clorox products have been in the limelight amid the coronavirus pandemic, investors remain optimistic about the performance of this Zacks Rank #1 (Strong Buy) stock. In fact, the stock’s VGM Score of B and long-term earnings growth rate of 5.8% also pose a favorable view. Moreover, the stock is hovering close to its 52-week high of $214.26.
Church & Dwight Co., Inc. (CHD - Free Report) has an expected long-term earnings growth rate of 8.2% and a Zacks Rank #2 (Buy).
Kimberly-Clark Corporation (KMB - Free Report) is also a Zacks Rank #2 stock, which has a long-term earnings growth rate of 5.1%.
5 Stocks to Soar Past the Pandemic:
In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
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Clorox (CLX) Appears Promising: What's Driving the Stock?
The Clorox Company (CLX - Free Report) is currently witnessing a consumer boom stemming from the coronavirus situation, when most companies around the world have been badly hit by government restrictions and sheer panic among people. The novel coronavirus has been wreaking havoc since its onset, killing millions of people and putting the global economy on a standstill. The uncertainty caused by the pandemic has led to temporary store closures, furlough of employees, pay cuts, job losses, among others, which has dealt a blow to the economy.
As consumers focus on their personal hygiene owing to the spread of this deadly virus, demand for Clorox disinfectant products have sky-rocketed. Moreover, the demand increased after the Environmental Protection Agency listed it as one of the anti-microbial products that are effective against the coronavirus. To meet this growing demand of customers and healthcare workers, the company has increased production of disinfecting products. Also, it came out with a new 55-gallon bleach-drum for healthcare facilities in the United States, which can clean up to 14,000 hospital rooms.
Driven by strong growth in the disinfecting products and broad-based growth at all four segments, Clorox posted robust third-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate and grew year over year. Encouragingly, management raised view for fiscal 2020. This has led to the stock gaining 21.6% in the past three months against the industry’s decline of 1.3%.
For fiscal 2020, management now projects sales growth of 4-6% againsta low-single-digit decline to a 1% increase expected earlier. The raised guidance reflects expectations of gains from the COVID-19-related demand spike. It now expects organic sales growth of 6-8% versus the prior view of flat to up 2%. Moreover, gross margin is now estimated to rise substantially, reflecting continued gains from operating leverage, backed by robust sales and cost savings. Management now anticipates fiscal 2020 earnings per share of $6.70-$6.90, indicating a rise of 6-9% year over year. Earlier, it had envisioned earnings per share of $6.10-$6.25.
Apart from these, it remains on track with the IGNITE strategy, aimed at the expansion of the key elements under the 2020 Strategy to pace up innovation in each area of business. The IGNITE strategy mainly focuses on four strategic areas — fueling growth through brand reinvestments, innovating to deliver enhanced customer experience, developing product portfolio and re-imagining the company’s operations. Driven by these, management expects to achieve long-term financial targets, including net sales growth of 2-4%, EBIT margin expansion of 25-50 basis points (bps) and free cash flow generation to be 11-13% of sales.
Additionally, Clorox aims at increasing cost-savings annually by emphasizing more on technology and integrated design. With this, it expects to achieve EBIT margin expansion of 175 basis points annually. Such cost-saving and pricing actions should continue to support its investments in long-term brands and category growth.
Summing Up
As Clorox products have been in the limelight amid the coronavirus pandemic, investors remain optimistic about the performance of this Zacks Rank #1 (Strong Buy) stock. In fact, the stock’s VGM Score of B and long-term earnings growth rate of 5.8% also pose a favorable view. Moreover, the stock is hovering close to its 52-week high of $214.26.
Other Stocks to Consider
The J.M. Smucker Company (SJM - Free Report) has an expected long-term earnings growth rate of 2.2% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Church & Dwight Co., Inc. (CHD - Free Report) has an expected long-term earnings growth rate of 8.2% and a Zacks Rank #2 (Buy).
Kimberly-Clark Corporation (KMB - Free Report) is also a Zacks Rank #2 stock, which has a long-term earnings growth rate of 5.1%.
5 Stocks to Soar Past the Pandemic:
In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.
See the 5 high-tech stocks now>>