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Clorox Poised for Comeback: Analyst Predicts Earnings Beats and 3-Year Growth Surge, Upgrades Stock

AInvestTuesday, Oct 1, 2024 2:56 pm ET
2min read
The Clorox Company (NYSE: CLX) has weathered significant challenges in recent years, including a cyberattack and supply chain disruptions. However, the company's strategic initiatives and operational improvements have positioned it for a comeback, with analysts predicting earnings beats and a three-year growth surge. As a result, one analyst has upgraded the stock's rating.

Clorox's strategic and operational initiatives have contributed significantly to its Q4 earnings beat. The divestment of its Better Health Vitamins, Minerals, and Supplements (VMS) business allowed the company to focus on its core cleaning and household products. This move also created new opportunities for Clorox to invest in and grow its remaining product lines, such as its popular disinfectant sprays and floor cleaners.


The implementation of a streamlined operating model has enhanced Clorox's ability to respond more quickly to changing consumer behaviors and innovate faster. This new model is expected to deliver ongoing cost savings of approximately $100 million annually, further boosting the company's profitability.

Clorox's advertising and innovation strategies have been effective in driving value superiority and regaining market share after the cyberattack. The company continued to invest behind value superiority with strong advertising and innovations across major brands in fiscal year 2024. These efforts included the launch of new products such as Clorox Toilet Bomb Foaming Toilet Bowl Cleaner and Pine-Sol concentrated multi-surface cleaner.


Cost-saving initiatives, including lower manufacturing and logistics costs, have benefited Clorox's gross margin and overall profitability in Q4. The company's gross margin increased by 380 basis points to 46.5% in the fourth quarter, primarily due to lower manufacturing and logistics costs, the benefit of cost savings initiatives, and favorable commodity costs. These factors were partially offset by the impact of higher trade promotion spending.

Price hikes and easing input costs have played a significant role in improving Clorox's margins and driving earnings growth. The company's consecutive price hikes of its home care products, coupled with easing input costs, have helped Clorox expand its quarterly gross margins and achieve double-digit adjusted EPS growth. These factors are expected to be sustainable in the long term, as consumers continue to prioritize shopping for daily essentials.


Clorox's divestment of the VMS business has also impacted its financial projections and earnings expectations for the next three years. The company expects its annual net sales to be flat to down 2%, below analysts' estimates of a 2.55% rise. However, Clorox's earnings per share are expected to be between $6.55 and $6.80, above analysts' estimate of $6.45 per share.

In conclusion, Clorox's strategic and operational initiatives, combined with its effective advertising and innovation strategies, have positioned the company for a comeback. Analysts predict earnings beats and a three-year growth surge, leading one analyst to upgrade the stock. As Clorox continues to focus on its core cleaning and household products and invest in its remaining product lines, it is well-positioned to capitalize on the growing demand for cleaning and disinfecting products in the post-pandemic world.
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