Clorox Posts Robust Earnings - Analyst Blog

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The Clorox Company ( CLX ) came up with higher-than-expected earnings for first-quarter fiscal 2014. The company's earnings per share of $1.04 from continuing operations surpassed the Zacks Consensus Estimate of $1.00 and rose nearly 3.0% from the year-ago quarter figure  of $1.01.

Quarterly earnings of the company were primarily driven by increased pricing, higher volume and effective cost management, partially offset by adverse foreign currency exchange rates and increase in manufacturing and logistics costs as well as commodity costs.

Net sales marginally improved year over year to $1,364 million from $1,338 million in the year-ago quarter. Benefits from increased pricing, higher volumes as well as favorable product mix and assortments were partially offset by unfavorable foreign exchange rates. Total volume inched up 1% in the quarter. Moreover, total revenue surpassed the Zacks Consensus Estimate of $1,356 million.

Revenues by Segment

Sales in the Cleaning segment nudged up 1% to $479 million, primarily driven by increased pricing and favorable mix and assortment. During the quarter, the segment witnessed volume growth in its Professional Products and Laundry businesses, while shipment of disinfecting wipes declined.

Household sales increased 5% to $372 million primarily due to the company's increased pricing strategy, higher volume and reduced trade promotion spending. Volumes in the quarter benefited from increased shipment for Charcoal. This occurred due to strong summer holiday merchandising events and higher shipments for Cat Litter owing to the introduction of new products.

Sales at the Lifestyle segment rose 5% to $218 million, primarily due to an increased pricing, higher volume and favorable mix and assortment, partially offset by higher trade promotion spending. Segment volume increased 4% year over year.

In the International business segment, Clorox's sales fell 3% to $295 million, due to unfavorable currency translation, partially offset by increased pricing. Excluding currency effect, sales increased 4% year over year. Segment volume remain flat year over year as volume gains in Latin America, the Middle East and Asia were fully offset by volume declines in Venezuela, Argentina and Canada.

Costs and Margins

Clorox's gross margin remains flat year over year at 42.9%. The year-over-year flat gross margin was primarily due to the company's price increase and strong cost saving initiatives, partially offset by increase in manufacturing and logistics costs as well as commodity costs. Consequently, operating margin from continuing operations marginally improved to 17.1% in the quarter from 17.0 in the year-ago comparable quarter, primarily driven by aggressive cost cuts.

Balance Sheet and Cash Flow

Clorox ended the quarter with cash and cash equivalents of $323 million and long-term debt of $2,170 million. At the quarter-end, the company generated $179 million of net cash from operations against $208 million at the end of first quarter of fiscal 2013, primarily due to higher tax payments.

Guidance

Anticipating pressures from unfavorable foreign currency exchange rates and increased commodity costs, Clorox has lowered its sales and earnings forecasts for fiscal 2014. The company now expects sales to grow in the range of 2%-3%, instead of 2%-4% projected earlier. Further, earnings per share are now expected to be $4.45-$4.60, down from earlier forecast of $4.55-$4.70.

The company, which competes with Church & Dwight Company Inc. ( CHD ), Colgate-Palmolive Company ( CL ) and Procter & Gamble Company ( PG ) also, lowered its operating margin expansion anticipation in the range of flat to 25 basis points (bps) in fiscal 2014 from the previous projection of 25-50 bps.

Headquartered in Oakland, California, Clorox is primarily engaged in the production, marketing and sale of consumer products in the U.S. and international markets. This Zacks Rank #4 (Sell) company sells its products primarily through mass merchandisers, grocery stores and other retail outlets. Clorox manufactures products in more than 24 countries and markets them in more than 100 countries.



CHURCH & DWIGHT (CHD): Free Stock Analysis Report

COLGATE PALMOLI (CL): Free Stock Analysis Report

CLOROX CO (CLX): Free Stock Analysis Report

PROCTER & GAMBL (PG): Free Stock Analysis Report

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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 The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CHD , CL , CLX , PG

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