The Clorox Company’s CLX shares have risen 3.8% in the past week following its robust first-quarter results and raised earnings per share (EPS) view for fiscal 2025. Also, the company has made a successful recovery from the cyberattack-related headwinds in the prior year.
The company delivered its eighth consecutive quarter of gross-margin expansion, with the metric increasing 740 basis points (bps) in the most recent quarter. Growth was driven by substantial cost savings and a comprehensive margin management program, thereby strengthening CLX’s capacity to support growth. It is on track to fully restore the gross margin by fiscal 2025, as the metric likely to expand in the band of 100-150 bps.
In addition, Clorox has been gaining from pricing and cost-saving initiatives for a while now. Its integrated IGNITE strategy, which focuses on the expansion of the key areas to pace up innovation across each area of the business, is on track. The CLX stock has been gaining consistently over the past year. The stock has rallied 26.7% in a year compared with the Zacks Soap and Cleaning Materials industry’s 19% growth and the broader Consumer Staples sector’s 10.8% rise.
CLX's Price Performance
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Let us assess the company’s first-quarter fiscal 2025 results, outlook and other factors to make a better judgement on the stock.
CLX’s Q1 Results & Outlook
During the fiscal first quarter, adjusted EPS of $1.86 increased sharply from 49 cents in the year-ago quarter and beat the Zacks Consensus Estimate of $1.36. The bottom-line results benefited from improved net sales and cost savings, offset by higher advertising investments. Earnings surpassed the consensus mark for the ninth straight quarter. CLX has a trailing four-quarter average earnings surprise of 45.9%
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Net sales of $1.76 billion improved 27% year over year and surpassed the Zacks Consensus Estimate of $1.63 billion. This rise can be attributed to higher volume, reflecting the lapping of the cyberattack.
Organic sales increased 31% year over year, fueled by double-digit growth across all segments. Improved share in most categories and a complete recovery of the overall market share further bolstered sales. The top line beat the consensus mark in seven of the last nine quarters. Sales growth also reflects sturdy sales across the company’s segments, except for the International unit.
As a result, management now projects adjusted EPS to be in the range of $6.65-$6.90, up from the $6.55-$6.80 mentioned earlier. The revised adjusted EPS outlook indicates a 8-12% year-over-year increase.
CLX continues to expect fiscal 2025 net sales between flat to down 2% from the prior year’s actual. Organic sales are anticipated to increase in the band of 3-5%, excluding two points of negative impacts of the divestiture of the company's business in Argentina and three points from the expected sale of the Better Health VMS business.
CLX’s Estimates Reflect Positive Trend
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Clorox’s fiscal 2025 EPS has increased 2.3%. The estimate fiscal 2026 has risen 1.7% in the past 30 days.
The Zacks Consensus Estimate for CLX’s fiscal 2025 EPS implies 10.1% growth year over year. For fiscal 2026, the consensus mark for sales and EPS indicates 2.4% and 5.3% year-over-year increase, respectively.
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Analyzing Clorox’s Other Strengths
Clorox’s robust pricing and cost-saving initiatives offset elevated manufacturing and logistic costs and adverse foreign currency translations. The company’s IGNITE strategy, its latest and integrated strategy, has been formulated on a sturdy foundation of its 2020 Strategy. The IGNITE strategy encompasses the long-term financial targets of achieving net sales growth in the band of 2-4%, EBIT margin expansion of 25-50 basis points and free cash flow generation of 11-13% of sales.
Management has announced a streamlined operating model to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. Clorox has completed the implementation of a streamlined operating model. This new structure is expected to generate ongoing annual cost savings of approximately $100 million, significantly enhancing operational efficiency.
In addition, Clorox has been making smart moves to boost its portfolio structure to bolster sales and the overall profitability. The company has concluded the divestiture of its Better Health Vitamins, Minerals and Supplements unit in its entirety to an affiliate of Piping Rock Health Products, LLC. This divestiture, coupled with the sale of the Argentina business, enables CLX to create an efficient portfolio to deliver sustainable profits by focusing on core brands within the portfolio. Such moves resonate well with its IGNITE strategy.
Overall, the company has been strengthening its competitive advantage, accelerating profitable growth and preparing for long-term success. Clorox has been experiencing strong progress in the core International business as it continues to build on the success of the segment's Go Lean strategy. Driven by its IGNITE initiative, which aims to improve profitability in the International business, the company expects to invest selectively in profitable platforms. Management continues to explore the international opportunities.
CLX Stock’s Attractive Valuation
Clorox stock is trading at a discount valuation relative to the industry. Going by the price/sales ratio, the stock is currently trading at 2.82 on a forward 12-month basis, lower than 3.45 for the industry. Also, the stock is trading much lower than its five-year high of 4.36.
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Final Words on Clorox
CLX’s robust strategies, including the IGNITE initiative and cost savings, position it well for long-term growth. Its appealing valuation and rise in earnings estimates further act as tailwinds. The company currently carries a Zacks Rank #2 (Buy).
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