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Clorox (CLX) Q3 Earnings Top, View Up on Coronavirus-Led Demand
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The Clorox Company (CLX - Free Report) reported robust third-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate and grew year over year. Strong quarter performance aided management to raise guidance for the fiscal year.
During the quarter, the company experienced strong growth in the disinfecting products and broad-based growth at all four segments as the company catered well to consumers in wake of the coronavirus outbreak. Also, the company’s IGNITE strategy and product portfolio bode well. These factors also position the company well going forward. Shares of Clorox rose around 3% in the pre-market session on robust quarterly results and an upbeat outlook. In the past three months, shares of this Zacks Rank #1 (Strong Buy) company have rallied 19.7% against the industry’s 8.2% fall.
Q3 Highlights
Quarterly earnings from continuing operations of $1.89 per share increased about 31% year over year and beat the Zacks Consensus Estimate of $1.72. The upside was mainly driven by higher net sales and gross margin, partly offset by increased selling and administrative costs and advertising investments.
The company posted net sales of $1,783 million, up nearly 15% year over year and above the Zacks Consensus Estimate of $1,714 million. This was backed by 18 points of volume growth on increased demand for products in light of the pandemic. Growth was partly offset by 2 points owing to adverse foreign currency rates and 1 point from unfavorable price mix. Also, organic sales increased 17% in the quarter.
Moreover, Clorox witnessed gross margin expansion of 330 bps to 46.7% in the fiscal second quarter. This marked the company’s sixth straight quarter of gross margin expansion. The rise in gross margin was driven by gains from cost savings and double-digit volumes, somewhat marred by higher trade promotion spending.
The Clorox Company Price, Consensus and EPS Surprise
Sales of the Cleaning segment surged 32% at $671 million on double-digit shipment increases across all business units. Notably, Home Care was the key driver, with robust gains from Laundry and Professional products on higher demand for disinfecting wipes, sprays, disinfecting bleach, wipes and more. Also, robust consumer demand fueled increased household penetration on its retail brands.
The Household segment’s sales inched up 2% to $500 million mainly driven by Cat Litter and Grilling on higher consumer demand. The improvement was somewhat offset by increased trade promotion spending.
Sales at the Lifestyle segment grew 10% to $339 million on sales growth in three of its four business units and robust contributions from Food and Natural Personal Care. Growth was somewhat offset by a fall in Dietary Supplements on supply disruption owing to the coronavirus pandemic.
At the International segment, sales increased 11% to $273 million from the year-ago quarter on benefits from higher volumes in every geographic region. Though sales were hurt by 11 points of foreign currency impact, this was partly mitigated by strong pricing action implemented prior to the pandemic. Organic sales for the segment rose 22%.
Financials
Clorox ended the fiscal third quarter with cash and cash equivalents of $496 million, and long-term debt of $2,288 million. During the nine months of fiscal 2020, the company generated $806 million of net cash from continuing operations.
Fiscal 2020 Guidance
Clorox updated its outlook for fiscal 2020, assuming minimal supply chain disruptions for rest of the fiscal. It now projects sales growth of 4-6% compared with the prior estimation of low-single digits decline to up 1%. The raised guidance reflects expectations of favorable COVID-19 impact. Also, higher product demand on robust customer plans and innovations will aid. However, the sales view reflects about 2 points of foreign exchange woes. Further, the company now expects organic sales growth of 6-8% versus the prior anticipation of flat to up 2%. The current Zacks Consensus Estimate for fiscal 2020 sales is pegged at $6.43 billion.
Moreover, gross margin is now estimated to rise substantially, reflecting continued gains from operating leverage backed by robust sales and cost savings. This will be somewhat offset by temporary investments with respect to employees and operational safety measures. Also, increased transportation and warehousing expenses remain deterrents. Advertising and sales promotion spending is now anticipated at nearly 10% of sales. Selling and administrative expenses are projected around 15% of sales. The company envisions effective tax rate of 21-22% for fiscal 2020.
Management now anticipates fiscal 2020 earnings per share of $6.70-$6.90, indicating a rise of 6-9% year over year. Earlier, it had envisioned earnings per share of $6.10-$6.25. The current Zacks Consensus Estimate for fiscal 2020 earnings is pegged at $6.60, which is likely to witness upward revisions in the coming days.
Campbell Soup Company (CPB - Free Report) has an expected long-term earnings growth rate of 7.2% and a Zacks Rank #2.
General Mills (GIS - Free Report) is also a Zacks Rank #2 stock which has a long-term earnings growth rate of 7.5%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Clorox (CLX) Q3 Earnings Top, View Up on Coronavirus-Led Demand
The Clorox Company (CLX - Free Report) reported robust third-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate and grew year over year. Strong quarter performance aided management to raise guidance for the fiscal year.
During the quarter, the company experienced strong growth in the disinfecting products and broad-based growth at all four segments as the company catered well to consumers in wake of the coronavirus outbreak. Also, the company’s IGNITE strategy and product portfolio bode well. These factors also position the company well going forward. Shares of Clorox rose around 3% in the pre-market session on robust quarterly results and an upbeat outlook. In the past three months, shares of this Zacks Rank #1 (Strong Buy) company have rallied 19.7% against the industry’s 8.2% fall.
Q3 Highlights
Quarterly earnings from continuing operations of $1.89 per share increased about 31% year over year and beat the Zacks Consensus Estimate of $1.72. The upside was mainly driven by higher net sales and gross margin, partly offset by increased selling and administrative costs and advertising investments.
The company posted net sales of $1,783 million, up nearly 15% year over year and above the Zacks Consensus Estimate of $1,714 million. This was backed by 18 points of volume growth on increased demand for products in light of the pandemic. Growth was partly offset by 2 points owing to adverse foreign currency rates and 1 point from unfavorable price mix. Also, organic sales increased 17% in the quarter.
Moreover, Clorox witnessed gross margin expansion of 330 bps to 46.7% in the fiscal second quarter. This marked the company’s sixth straight quarter of gross margin expansion. The rise in gross margin was driven by gains from cost savings and double-digit volumes, somewhat marred by higher trade promotion spending.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote
Segmental Discussion
Sales of the Cleaning segment surged 32% at $671 million on double-digit shipment increases across all business units. Notably, Home Care was the key driver, with robust gains from Laundry and Professional products on higher demand for disinfecting wipes, sprays, disinfecting bleach, wipes and more. Also, robust consumer demand fueled increased household penetration on its retail brands.
The Household segment’s sales inched up 2% to $500 million mainly driven by Cat Litter and Grilling on higher consumer demand. The improvement was somewhat offset by increased trade promotion spending.
Sales at the Lifestyle segment grew 10% to $339 million on sales growth in three of its four business units and robust contributions from Food and Natural Personal Care. Growth was somewhat offset by a fall in Dietary Supplements on supply disruption owing to the coronavirus pandemic.
At the International segment, sales increased 11% to $273 million from the year-ago quarter on benefits from higher volumes in every geographic region. Though sales were hurt by 11 points of foreign currency impact, this was partly mitigated by strong pricing action implemented prior to the pandemic. Organic sales for the segment rose 22%.
Financials
Clorox ended the fiscal third quarter with cash and cash equivalents of $496 million, and long-term debt of $2,288 million. During the nine months of fiscal 2020, the company generated $806 million of net cash from continuing operations.
Fiscal 2020 Guidance
Clorox updated its outlook for fiscal 2020, assuming minimal supply chain disruptions for rest of the fiscal. It now projects sales growth of 4-6% compared with the prior estimation of low-single digits decline to up 1%. The raised guidance reflects expectations of favorable COVID-19 impact. Also, higher product demand on robust customer plans and innovations will aid. However, the sales view reflects about 2 points of foreign exchange woes. Further, the company now expects organic sales growth of 6-8% versus the prior anticipation of flat to up 2%. The current Zacks Consensus Estimate for fiscal 2020 sales is pegged at $6.43 billion.
Moreover, gross margin is now estimated to rise substantially, reflecting continued gains from operating leverage backed by robust sales and cost savings. This will be somewhat offset by temporary investments with respect to employees and operational safety measures. Also, increased transportation and warehousing expenses remain deterrents. Advertising and sales promotion spending is now anticipated at nearly 10% of sales. Selling and administrative expenses are projected around 15% of sales. The company envisions effective tax rate of 21-22% for fiscal 2020.
Management now anticipates fiscal 2020 earnings per share of $6.70-$6.90, indicating a rise of 6-9% year over year. Earlier, it had envisioned earnings per share of $6.10-$6.25. The current Zacks Consensus Estimate for fiscal 2020 earnings is pegged at $6.60, which is likely to witness upward revisions in the coming days.
Other Stocks to Consider
Church & Dwight Co., Inc. (CHD - Free Report) has an expected long-term earnings growth rate of 8.2% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Campbell Soup Company (CPB - Free Report) has an expected long-term earnings growth rate of 7.2% and a Zacks Rank #2.
General Mills (GIS - Free Report) is also a Zacks Rank #2 stock which has a long-term earnings growth rate of 7.5%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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