The Clorox Company
) hit an all-time high of $80.86 on Monday, Feb 4, just after the
company reported a better-than-expected second-quarter results
and an upbeat outlook for fiscal 2013. This Zacks Rank #3 (Hold)
global consumer product company eventually closed at its highest
mark of $79.72 yesterday, representing a healthy return of 18.1%
over the last one year. Average volume of shares traded over the
last 3 months stands at approximately 923,319.
Drivers that Triggered Momentum
An impressive record of beating the quarterly earnings
expectations, a positive fiscal 2013 outlook and a decent
dividend yield are the factors that enabled the shares of Clorox
to reach a new high.
With respect to earnings surprise, Clorox has been beating the
Zacks Consensus Estimate for the last 9 quarters, most recently
topping it by 11.1% in the second quarter of fiscal 2013.
Yesterday, Clorox came up with impressive earnings and sales
comparisons for the second quarter of fiscal 2013. The company's
adjusted earnings of 90 cents per share jumped approximately
13.9% from the year-ago quarter's earnings of 79 cents and beat
the Zacks Consensus Estimate of 81 cents.
The company's earnings benefited from improvements in revenues
as well as gross margins, offset by higher selling and
administration expenses as it continues to invest in information
technology (IT) systems.
Net sales elevated 8.5% year over year to $1,325 million from
$1,221 million in the year-ago quarter, mainly due to improved
prices and volumes. Moreover, total revenue came in ahead of the
Zacks Consensus Estimate of $1,270 million. Total volume
increased 5% from the comparable quarter last year.
Bolstered by better-than-expected quarterly performance,
Clorox raised its sales growth forecast to 3%-5% for fiscal 2013
from 2%-4% forecasted earlier, driven by better category-wise
performances, 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 flat commodity costs
forecasts. Further, the company now anticipates annual earnings
of $4.25-$4.35 per share in fiscal 2013, up from the previous
guidance range of $4.20-$4.35.
Clorox is also known for its shareholder friendly moves. Since
1983, the company has increased its dividend from 1.875 cents to
64 cents. This currently yields a solid 3.21%, while the company
has a payout ratio of 59%. We believe that its continuous
dividend payments and increments reflect the growth potential of
its earnings and cash flow generation capabilities.
Besides Clorox, other consumer products companies like
Church & Dwight Co. Inc.
Procter & Gamble Company
) also focus on improving shareholder value by paying regular
Stock's Key Indicators
Clorox currently trades at a forward P/E of 18.52x, slightly
above the peer group average of 18.47x. Again, its price-to-sales
ratio of 1.86 is in line with the peer group average. Moreover,
the company's return-on-investment (ROI) and return-on-asset
(ROA) are 32.2% and 12.5%, respectively, which are significantly
higher than the peer group average. The company's strong
fundamentals are well supported by its long-term estimated EPS
growth rate of 8.4%.
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