Yahoo Finance Here's Why Clorox's (CLX) Strategic Efforts Appear Good
The Clorox Company CLX appears encouraging, thanks to its robust strategic efforts. The company 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 elements under the 2020 Strategy to pace up innovation across each area of the business, also bodes well.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Clorox’s fiscal 2024 earnings per share (EPS) is pegged at $5.84, indicating a year-over-year increase of 14.7%. The consensus estimate for fiscal 2025 sales and EPS is presently $7.36 billion and $6.39, respectively, indicating increases of 2.6% and 9.4% year over year.
Shares of this producer, marketer and seller of consumer products have gained 9.6% in the past six months compared with the industry’s 2.4% growth. A Growth Score of B further adds strength to this Zacks Rank #3 (Hold) company.
Let’s Delve Deeper
Clorox’s robust pricing and cost-saving initiatives offset elevated manufacturing and logistic costs and adverse foreign currency translations. This led to a gross margin expansion of 40 basis points (bps) year over year during the third quarter of fiscal 2024. For fiscal 2024, the gross margin is projected to be up about 275 bps, reflecting gains of lower input cost headwinds and the modest benefit from exiting Argentina. This reflects the combined benefit of pricing actions, cost savings and supply-chain optimization, partly offset by supply-chain inflation and the impacts of cyberattacks.
Clorox has started executing on its plans to invest $500 million in the next few years in transformative technologies and processes. The investments began in the first quarter of fiscal 2022 and include the replacement of the company's enterprise resource planning system, its transition to a cloud-based platform and the implementation of a suite of other digital technologies.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote
In addition, the company is experiencing strong progress in the core International business as it continues to build on the success of the segment's Go Lean strategy. These efforts will help in accelerating profitable growth for the segment. In the fiscal third quarter, sales in the International segment rose 2% year over year. This was driven by a volume rise of one point and 45-point gain from a favorable price mix offset by a 44-point impact from unfavorable currency. Organic sales for the segment improved 48%. Management continues to explore international opportunities.
However, Clorox has been reeling under the adverse impacts of inflation, higher manufacturing, logistics and commodity costs. In addition, the company has been witnessing higher selling and administrative expenses. In third-quarter fiscal 2024, selling and administrative expenses, as a percent of sales, rose 40 bps year over year to 16.6%.
Nevertheless, the company is on track with the IGNITE strategy. This strategy encompasses the long-term financial targets of achieving net sales growth in the range of 3-5%, EBIT margin expansion in the band of 25-50 bps and free cash flow generation of 11-13% of sales. Management had announced a streamlined operating model to create a faster, simpler company through the Reimagine Work under its IGNITE strategy. The operating model will help increase efficiency and transform the company's operations in the areas of the supply chain, digital commerce, innovation and brand building over the long term.
Stocks to Consider
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The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings implies growth of 22.5% and 59.3%, respectively, from the year-ago reported numbers.
Utz Brands Inc. UTZ, which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank #2 (Buy). UTZ has a trailing four-quarter earnings surprise of 2%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year EPS indicates growth of 26.3% from the year-ago reported numbers.
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The Clorox Company (CLX) : Free Stock Analysis Report
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