It has been about a month since the last earnings report for Clorox (CLX). Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Clorox due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Clorox's Q1 Earnings & Sales Beat Estimates
Clorox posted first-quarter fiscal 2025 results. The improvement was driven by positive sentiment around the company’s recovery from the cyberattack-related headwinds in the prior year. The results also reflect the previous divestiture of the Argentina business.
The company’s sales and earnings per share (EPS) surpassed the Zacks Consensus Estimate and improved year over year. Backed by the strong results, CLX raised its EPS view for fiscal 2025, improving investor sentiment.
Adjusted EPS of $1.86 increased many-fold 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.
Net sales of $1.76 billion improved 27% from the year-ago quarter 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. Top-line growth was further supported by improved shares in most categories and a complete recovery of overall market share.
The gross margin expanded 740 basis points (bps) year over year to 45.8% in the reported quarter, marking the company's eighth consecutive quarter of margin expansion. This growth was driven by substantial cost savings and a comprehensive margin management program, strengthening CLX’s capacity to support growth.
Discussion on CLX’s Segments
Sales of the Health and Wellness segment rose 38% year over year to $698 million, beating our estimate of $635 million. The rise was driven by a 38-point increase in volume and a two-point gain from a favorable mix, offset by a two-point impact of higher promotional trade spending. The segment-adjusted EBIT grew 126%, backed by improved sales and cost savings, partly negated by elevated advertising costs.
The Household segment’s sales improved 38% year over year to $447 million. Our model had predicted sales of $399.8 million for the segment. The segments’ sales were mainly driven by 43-point volume growth, offset by a five-point impact of an unfavorable mix and elevated trade promotion spending. Segment-adjusted EBIT rose substantially from the year-ago quarter due to higher sales and cost savings, offset by increased advertising costs.
Sales in the Lifestyle segment rose 40% year over year to $320 million. We expected net sales of $279.4 million for the segment. The benefits of 48 points of improved volume were partly offset by 8 points of headwinds from an unfavorable mix and higher trade promotion spending. Segment-adjusted EBIT rose 247% on improved sales, offset by higher advertising investments.
In the International segment, sales declined 4% year over year to $259 million. We anticipated net sales of $259.2 million for the segment. This drop in sales was led by the divestiture of the Argentina business and a two-point impact of adverse currency rates. Excluding these, organic sales rose 11%, supported by 11 points of volume growth. Segment-adjusted EBIT rose 3% due to volume growth, excluding the Argentina business, partly offset by increased advertising spending.
Clorox's Financial Update
Clorox ended the quarter with cash and cash equivalents of $278 million, long-term debt of $2.5 billion and stockholders’ equity of $60 million, excluding the non-controlling interest of $164 million.
CLX’s Guidance for FY25
Management expects fiscal 2025 net sales to be flat to down 2% from the prior year’s actual. Organic sales are anticipated to increase 3-5%, excluding 2 points of negative impacts of the divestiture of the company's business in Argentina and 3 points from the expected sale of the Better Health VMS business.
The gross margin is expected to improve 100-150 bps, driven by comprehensive margin management efforts, though partially offset by cost inflation and higher trade promotional expenses. Selling and administrative expenses are forecast between 15% and 16% of net sales, indicating a 150-bps impact of strategic investments in digital capabilities and productivity enhancements.
The company projects an adjusted EPS of $6.65-$6.90 versus the $6.55-$6.80 mentioned earlier. The revised adjusted EPS suggests an 8-12% year-over-year increase.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -9.75% due to these changes.
VGM Scores
Currently, Clorox has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Clorox has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Clorox belongs to the Zacks Consumer Products - Staples industry. Another stock from the same industry, Newell Brands (NWL), has gained 8.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Newell Brands reported revenues of $1.95 billion in the last reported quarter, representing a year-over-year change of -4.9%. EPS of $0.16 for the same period compares with $0.39 a year ago.
For the current quarter, Newell Brands is expected to post earnings of $0.14 per share, indicating a change of -36.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.2% over the last 30 days.
Newell Brands has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
