The Clorox Company
), one of the world's leading manufacturers of consumer products,
posted its third-quarter 2012 results on Wednesday, 2
May. Therefore, the analysts had just over a week to ponder over
the results. In the subsequent paragraphs, we will cover the recent
earnings announcement, analysts' estimate revisions as well as the
Zacks Rank and long-term recommendation on the stock.
Clorox 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, above the Zacks Consensus Estimate of $1.03.
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
reportable segments. Revenue also benefited from price increases
across the board. Total revenue also surpassed the Zacks Consensus
Estimate of $1,352 million.
Management Guidance for fiscals 2012 & 2013
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
However, gross margin guidance for 2012 was revised to reflect a
decline of 125 - 150 basis points compared with its previous
guidance of 50 - 75 basis points, due to the continued adverse
impact of product and country mix. Therefore, Clorox continues to
anticipate annual earnings of $4.00 to $4.10 per share in fiscal
2012. For fiscal 2012, Clorox expects to generate free cash flow of
about 9% of sales.
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. Moreover, the company
anticipates fiscal 2013 earnings per share to be in the range of
$4.20 - $4.35.
(Read our full coverage on this earnings report:
Clorox Beats, Guides 2012 & 2013
Agreement of Analysts
The analysts portrayed mixed sentiments for fourth-quarter 2012
while for first-quarter 2013, a negative sentiment is witnessed
among them. Over the last 7 days, 6 out of 14 analysts
revisited their estimates, of which 4 analysts lowered their
estimates for fourth-quarter 2012, while 2 analysts adjusted it in
the upward direction. For the first quarter of fiscal 2013, 5 out
of 8 analysts covering the stock lowered their estimates over the
last 7 days, while no movement was witnessed in the opposite
Over the last 7 days, 2 analysts reduced their estimates for
fiscal 2012, while for fiscal 2013, 1 analyst lowered the same.
Magnitude of Estimate Revisions
With no major movement in estimate revision seen over the past
one week, the Zacks Consensus Estimate for fiscal 2012 remained
stable at $4.06 per share, while for fiscal 2013 it moved down by a
penny to $4.28 per share.
For the fourth quarter of fiscal 2012, the Zacks Consensus
Estimate remained stagnant at $1.28 per share, over the last 7
days. However, for first-quarter 2013, analysts moved down their
estimates by 5 cents to $1.00 per share.
We believe Clorox's conservative gross margin outlook for fiscal
2012, has prompted analysts to revise their estimates accordingly.
Similarly, after considering Clorox's year-over-year flat operating
margin projection and earnings forecast for fiscal 2013, analysts
have lowered their estimates for first-quarter and fiscal 2013 to
better align with the company's guidance.
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
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