It has been about a month since the last earnings report for Clorox (CLX Quick QuoteCLX - Free Report) . Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Clorox due for a breakout? 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 Q3 Earnings Beat Estimates, Revenues Down Y/Y

Clorox reported third-quarter fiscal 2024 results, wherein the bottom line beat the Zacks Consensus Estimate and improved year over year. Significant gains from pricing actions and ongoing cost-saving initiatives aided the performance. Results also benefited from a solid innovation pipeline and digital transformation. CLX has been on track with its streamlined operating model, which aims to improve efficiency.

Q3 Update

Adjusted earnings of $1.71 per share jumped 13% year over year and beat the Zacks Consensus Estimate of $1.33. Bottom-line results gained from increased margins, and gains from pricing and cost savings, somewhat offset by adverse currency as well as lower volumes and increased manufacturing and logistics costs.

Adjusted earnings excluded one-time costs related to the recent cyberattack incident, and ongoing digital capabilities and productivity enhancements of 16 cents and 19 cents, respectively. CLX’s pricing and ongoing cast-saving initiatives contributed to its better-than-expected performance.

On a GAAP basis, the company reported loss of 41 cents per share, narrower from a loss of $1.71 per share reported a year ago.

Net sales of $1.81 billion dipped 5% from the year-ago quarter's level and missed the Zacks Consensus Estimate of $1.88 billion. On an organic basis, sales rose 2% year over year. The downside was mainly due to reduced volumes from temporary distribution losses stemming from the widescale disruptions from the cyberattack along with adverse foreign exchange rates, partly offset by favorable price mix.

The gross margin expanded 40 bps year over year to 42.2% in the fiscal third quarter. Gains from pricing and cost-saving initiatives were offset by the impact of adverse currency, and elevated manufacturing and logistics costs. We expect gross decrease of 50-bps for the fiscal third quarter.

Segmental Discussion

Sales of the Health and Wellness segment dropped 6% to $609 million, which lagged our estimate of $659.9 million. This was due to a fall of 4 points in volume and a two-point from adverse price mix.

The Household segment’s sales were down 4% to $526 million and came below our estimate of $594 million. The downside resulted from three points in volume and one-point from adverse price mix. Each of the segment’s businesses, including Bags and Wraps, and Cat Litter reported lower sales except for Grilling.

Sales in the Lifestyle segment decreased 11% year over year to $315 million and missed our estimate of $360.1 million. This was mainly driven by a nine-point decline in volumes and two points of adverse price mix. The segment’s three businesses – Food, Natural Personal Care and Water Filtration– reported sales decreases.

In the International segment, sales of $310 million were up 2% year over year and outshined our estimate of $228.8 million. This was driven by a volume rise of one point and 45-points gain from a favorable price mix offset by a 44-point impact from unfavorable currency. Organic sales for the segment improved 48%.

Financials

Clorox ended third-quarter fiscal 2024 with cash and cash equivalents of $219 million, and a long-term debt of $2.5 billion. Year-to-date, the company net cash provided by operations was $355 million compared to $728 million in the year-ago period, representing a 51% decrease.

Fiscal 2024 Guidance

For fiscal 2024, management still envisions net sales to be down low single digits year over year. However, management expects sales to be at the low end of the range, reflecting from impacts of the divestiture of the business in Argentina and third-quarter results. The sales guidance assumes three points of unfavorable foreign exchange rates. Organic sales are still anticipated to be up low single digits, but at the low end of the range.

Gross margin is projected to be up about 275 basis points, 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 cyberattack.

Selling and administrative expenses are likely to come between 16% to 17% of net sales, including 2.5 points of impacts of investments to enrich its digital capabilities, implementation of the streamlined operating model and expenses resulting from the cyberattack. Advertising and sales promotion spending is forecast to be higher than 11% of net sales, reflecting the impacts of lower sales and the exit from Argentina. The company's effective tax rate is likely to be about 31% versus the earlier expectation of 22-23%.

The company expects GAAP earnings of $3.06-$3.26 per share for fiscal 2024. The guidance suggests a year-over-year increase of 155-172%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Clorox has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Clorox has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.