) posted third-quarter 2012 earnings per share of $1.05 compared
with $1.03 earned in the prior-year quarter. However, considering
foreign exchange impact quarterly earnings came in at $1.04 per
share. The earnings in the quarter were also above the Zacks
Consensus Estimate of $1.03.
On a reported basis, including one-time items, the company
reported earnings per share of $1.01 versus $1.09 reported in the
During the quarter, the company's earnings benefited from the
ongoing cost-saving initiatives and price increases, while higher
raw material, manufacturing and logistics costs, poor product and
country mix, and spends on Information Technology (IT) systems and
research & development (R&D) facilities were minor
Clorox's net sales during the quarter were up 7% year over year
to $1,401 million from $1,304 million in the year-ago quarter,
driven by volume growth, contributions from new businesses acquired
earlier in the year as well as strength across all of the company's
Revenue also benefited from price increases across the board.
Total revenue also surpassed the Zacks Consensus Estimate of $1,352
Total volumes grew 4% year over year mainly due to product
innovation across the portfolio and strong retailer merchandising
on several brands.
Revenue by Segment
Sales in the
segment grew 10% primarily due to 7% volume growth, gains in the
Away From Home and Home Care business, price increases in the
Laundry business, offset by lower shipments in the Laundry
segment sales increased 6% primarily due to 2% growth in volume and
increased pricing. Higher volumes resulted from growth in shipments
in all three business segments.
segment recorded a 10% sales jump in the quarter compared with the
base period a year ago, on the back of a 4% volume growth and
increased pricing. The volume growth was primarily driven by higher
shipments in all of the segment's businesses.
business segment, Clorox's sales rose 4%, benefiting from price
increases and 1% volume growth, partially offset by unfavorable
foreign currency fluctuation and increase in trade-promotion
expenditure. Volumes in the quarter benefited from increased
shipments of home care products in the company's largest
international region, Latin America, offset by lower shipments in
the non-strategic export business, and a double-digit volume
decline in Venezuela.
Clorox's gross margin decreased 180 basis points (bps) to 42.3%
from 44.1% in the year-ago quarter. Increased commodity,
manufacturing and logistics costs, unfavorable product and country
mix more than offset benefits from price increases and prudent cost
savings, leading to gross margin contraction.
Balance Sheet and Cash Flow
At quarter-end, Clorox had cash and cash equivalents of $303
million and long-term debt of $1,570 million. For the nine months
ended March 31, 2012, the company generated $333 million cash from
operations, a $54 million decline from the year-ago period.
Looking ahead, the company adjusted its annual sales growth
guidance for fiscal 2012 to 4%, against the company's previous
guidance range of 2% - 4%. The revised guidance reflected
betterment in the U.S. categories as well as robust results on the
back of innovation, price increase and merchandising initiatives.
urther, though the company expects strong sales growth in the
fourth quarter, it is not as strong as the third quarter. This
compares to the company's record sales growth of 4% in the fourth
quarter of 2011.
Clorox continues to anticipate annual earnings of $4.00 to $4.10
per share in fiscal 2012. However, gross margin guidance for 2012
was revised to reflect a decline of 125 - 150 basis points compared
to the previous guidance of 50 - 75 basis points contraction, due
to the continued adverse impact of product and country mix. For
fiscal 2012, Clorox expects to generate free cash flow of about 9%
Additionally, the company also rolled out its fiscal 2013
guidance, projecting sales growth in the range of 2% - 4%.
Operating income margin for fiscal 2013 is expected to be flat, on
the back of a moderate expansion in gross margin offset by
increased administrative expenses. The company expects cost
containment efforts and price hikes to offset increasing
commodities and other manufacturing costs.
Further, the company guides expenditure toward systems and
facilities development and other restructuring initiatives to be in
the range of $50 - $55 million in fiscal 2012. The company
anticipates fiscal 2013 earnings per share to be in the range of
$4.20 - $4.35.
The Zacks Consensus Estimate for fiscal 2012 and 2013 stands at
$4.07 per share and 4.30 per share, respectively, which lie within
the company's guidance range for both periods.
Clorox is making intensive capital investments in information
technology systems and capabilities, particularly in the
international market and R&D facilities to boost productivity
while providing platforms for growth, product innovation and cost
savings. The company believes that these initiatives will begin
delivering benefits later in fiscal 2014 and beyond.
Clorox faces intense competition from other well-established
consumer product companies, both in the U.S. and international
markets. Most of the company's products compete with other widely
advertised brands within each product category and private label
brands and generic non-branded products of grocery chains and
wholesale cooperatives in certain categories, which typically are
sold at lower prices. The main competitors of Clorox are
Procter and Gamble Company
Currently, Clorox has a Zacks #4 Rank, implying a short-term
Sell rating. However, we have a long-term Neutral recommendation on
COLGATE PALMOLI (CL): Free Stock Analysis
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