) started fiscal 2013 on a triumphant note as it came up with
impressive earnings and sales comparisons for the first quarter
of fiscal 2013. The company posted earnings per share of $1.04
compared with $1.01 earned in the prior-year quarter, up 3.0%
year over year. Quarterly earnings also outdid the Zacks
Consensus Estimate of 95 cents, reflecting a surprise of 9.5%.
Including foreign exchange impact, the company reported earnings
per share of $1.01 versus 98 cents reported in the year-ago
The company's earnings benefited from improved revenue as well as
gross margins, offset by higher selling and administration
expenses as the company continues to invest in information
technology (IT) systems.
Net sales elevated 2.5% year over year to $1,338 million from
$1,305 million in the year-ago quarter, mainly on account of
improved prices, offset in part by lower volumes and unfavorable
foreign exchange. However, total revenue fell short of the Zacks
Consensus Estimate of $1,352 million.
Total volumes waned 1% compared to last year as higher prices
during the quarter pulled down total shipments.
Revenue by Segment
Sales in the
segment grew 8% to $472 million primarily due to a 4% volume
growth and higher prices. During the quarter, the segment
witnessed volume growth in its Professional Products business and
flat volume compares in the Home Care unit, offset by lower
shipments in the Laundry business. However, overall segment sales
growth was ahead of volumes growth, driven by higher prices for
segment sales skidded 3% to $355 million, while volume dipped 7%.
Sales and volumes in the quarter were affected by fall in
Charcoal business due to price increases made earlier in the
calendar year as well as strong merchandising and volume
comparisons from the year-ago quarter.
Sales at the
segment rose 1% to $208 million, despite a 1% decline in volume,
largely benefiting from price increases. Volume growth in the
Food business was offset by decline in Water Filtration business
and Burt's Bees volumes.
business segment, Clorox's sales rose 3% to $303 million,
benefiting from price increases, partially offset by a 2% volume
decline and unfavorable foreign exchange. Volume decline was
attributed to the exit of nonstrategic export businesses. On the
other hand, the segment's Base business in Latin America
reflected growth, while sales and volumes in Canada were
Costs and Margins
Clorox's adjusted gross margin expanded 90 basis points (bps) to
42.9% from 42.0% in the year-ago quarter. Solid costs savings and
improved prices led to increase in margins, while inflation
played spoilsport impacting manufacturing and logistics costs, as
well as other supply chain costs.
Advertising costs elevated 3.4% year over year to $122 million,
while as a percentage of revenue it increased 10 basis points to
9.1%. The effective tax rate increased from the year-ago quarter
to 31.6%, while it missed the forecast.
Balance Sheet and Cash Flow
Clorox ended the quarter with cash and cash equivalents of $667
million and long-term debt of $2,169 million. During the year,
the company generated $208 million net cash from operations,
exhibiting an increase of $77 million from the year-ago period.
In September, Clorox issued senior notes worth $600 million with
a maturity period of 10 years. This issue will help the company
boost its cash balances to repay long-term debt of $350 million
that matured in mid-October.
Looking ahead, Clorox reiterated its sales growth forecast of
2%-4% for fiscal 2013, driven by better categories growth, market
share gains and further product innovation across its brands. The
company expects operating income margin to expand by 25 to 50
basis points in fiscal 2013, on the back of strong cost savings,
the benefit of price increases and improved forecasts for
Effective tax rate for fiscal 2013 is expected in the range of
33% - 34%. The company anticipates annual earnings of $4.20 to
$4.35 per share in fiscal 2013. The Zacks Consensus Estimate for
fiscal 2013 stands at $4.29 per share, which lies within the
company's guidance range.
Further, Clorox guided expenditures toward systems and facilities
development and other restructuring initiatives to be in the
range of $50-$55 million in fiscal 2013. Free cash flow for
fiscal 2013 is estimated to be about 9% - 10% of sales.
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. The main competitors of Clorox are
Procter and Gamble Company
Currently, Clorox has a Zacks #3 Rank, implying a short-term Hold
rating. We have a long-term Outperform recommendation on the
COLGATE PALMOLI (CL): Free Stock Analysis
CLOROX CO (CLX): Free Stock Analysis Report
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