Follow Clorox to never miss an important update.
The latest data shows that consumer prices rose more than expected in October. For a company like Clorox, this is a sign that the costs it pays for things like ingredients, packaging, and shipping may not come down as quickly as hoped.
This matters because the business is currently in a tug-of-war between selling more products and keeping its profits healthy. While more people are buying its brands, higher expenses for logistics and materials have been eating into the profit made on each sale. If inflation stays high, it will be harder for the company to reach its goal of returning to its historical profit levels.
Source: Bloomberg Markets and Finance
Director Pierre Breber purchased about $400,000 worth of shares this week. Unlike the routine stock awards that executives often receive as part of their pay, this was an open-market purchase, meaning he used his own cash to increase his stake in the company.
This kind of buying is often seen as a vote of confidence in the company's direction. It is particularly notable coming just days after the company reported its latest earnings and confirmed a leadership transition for early next year.
After Clorox reported its November results, we updated our fair value and cut our quality score to 3.3. We moved our rating to Watch and lowered our projections for how much profit the company keeps from each dollar of sales. We have added the upcoming change in leadership and the lower profit margins of the professional hygiene business to what we track. We also increased our expectations for total sales growth following the purchase of the Purell brand.
Clorox earned $1.55 per share this quarter, which was well ahead of the $1.07 analysts expected. Revenue also came in slightly higher than predicted at $1.91 billion. The company said these results were helped by good timing and strong sales as it continues to win back market share it lost during past supply chain issues.
However, the outlook for the rest of the year is more cautious. Management noted that inflation, the rising cost of things like raw materials and shipping, is putting more pressure on the business than they previously thought. While the brands remain popular, the company now expects full-year earnings to come in at the lower end of its earlier forecast of $5.70 to $6.00 per share.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Evercore ISI upgraded the stock to In Line, which means they now expect it to perform about as well as the rest of the market. This move follows a period where the firm held a more negative view on the company's prospects.
The upgrade comes as Clorox shows it can still grow sales and manage its brands effectively even as it deals with higher costs for raw materials. The average analyst price target for the stock now sits at $92, which is slightly above the current price of about $88.
Source: Evercore ISI Group
Management consistently clears a low bar with small beats, but the recent habit of lowering their own outlook suggests they are struggling to get ahead of rising costs.
| Expectation | |
|---|---|
| EPS | $0.98 |
| Revenue | $1.87B |