Clorox (CLX) Surpasses Earnings & Sales Estimates in Q4
The Clorox Company CLX reported fourth-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and rose year over year. Despite cost inflation, results benefited from a solid innovation pipeline, digital transformation, pricing and cost-saving efforts. CLX has been on track with its streamlined operating model, which aims to improve efficiency.
Shares of the Zacks Rank #3 (Hold) company have gained 18.4% year to date compared with the industry’s 3.8% growth.
Q4 Details
Adjusted earnings of $1.67 per share surged 80% year over year and beat the Zacks Consensus Estimate of $1.19.
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Net sales of $2,019 million rose 12% from the year-ago quarter and surpassed the Zacks Consensus Estimate of $1,882 million. On an organic basis, sales improved 14%. The increase in sales was attributed to a favorable price mix, partly offset by lower volume and unfavorable currency.
The gross margin expanded 560 bps year over year to 42.7% in the fiscal fourth quarter. Gains from pricing and cost-saving initiatives were offset by elevated manufacturing and logistic costs, and higher commodity costs. It also marked the third consecutive quarter of a gross margin expansion on the back of cost pricing and high cost savings.
Segmental Discussion
Sales of the Health and Wellness segment grew 14% to $651 million which lagged our estimate of $654 million. The upside was led by a 16-point gain from a favorable price mix, offset by a 2-point decline in volume. Higher cleaning sales were driven by strong consumption from improved supply-chain performance. Professional Products sales grew on the back of strong consumption, as demand continued to recover and inventory levels continued to normalize.
The Household segment’s sales improved 14% to $663 million which came ahead of our estimate of $592 million. The increase in sales for the segment can be attributed to 17 points of pricing gains, offset by 3 points of volume decline. Bags and Wraps sales were driven by improved case-fill rates and merchandising activities. Cat Litter sales increased, supported by improved supply and innovation. Also, grilling sales grew due to enhanced merchandising activity during the peak grilling season.
Sales in the Lifestyle segment rose 14% year over year to $333 million which came ahead of our estimate of $298 million. This was mainly driven by a 15-point gain from a favorable price mix, offset by a 1-point decline in volume. Food sales increased, driven by innovation and merchandising activity. Natural Personal Care sales remained flat year over year due to growth in Lip Care, which was offset by lower shipments in Face Care. Water Filtration sales grew, driven by merchandising activities and distribution gains. Early shipments for back-to-college merchandising also bode well.
In the International segment, sales of $305 million were up 4% year over year and came ahead of our estimate of $297 million, driven by a 14-point gain from a favorable price mix, offset by a volume decline of 7 points and a 10-point impact from unfavorable currency. Organic sales for the segment improved 14%.
Financials
Clorox ended fourth-quarter fiscal 2023 with cash and cash equivalents of $367 million, and long-term debt of $2,477 million.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote
Fiscal 2024 Guidance
For fiscal 2024, the company envisions sales to be flat to up 2% year over year. Organic sales are anticipated to increase 2-4%.
The gross margin is expected to increase 150-175 bps in fiscal 2024, driven by the combined benefits of pricing actions, cost savings and supply-chain-optimization efforts, offset by continued cost inflation. The company expects selling and administrative expenses to be 15-16% of sales, including 1.5 points of impact from its strategic investments in digital capabilities and productivity enhancements.
Clorox anticipates advertising and sales promotion spending to be 11% of sales, driven by its commitment to investing in its brand portfolio. The effective tax rate is likely to be 24%.
The company expects diluted earnings of $4.65-$4.95 per share for fiscal 2024. The guidance suggests a year-over-year increase of 290-315%. On a non-GAAP basis, earnings per share are anticipated to be $5.60-$5.90, suggesting growth of 10-16% from the year-ago period’s reported number. This is mainly attributable to robust margins and solid top-line growth amid a challenging economy. This view excludes the 70-cent impact of long-term strategic investment in digital capabilities and productivity enhancements.
For the streamlined operating model program, it expects $75-$100 million in ongoing annual savings. The company expects the implementation of this new model to be completed in fiscal 2024.
Stocks to Consider
We highlighted some better-ranked stocks from the broader Consumer Staples space, namely TreeHouse Foods THS, Celsius Holdings CELH and Associated British Foods ASBFY.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial year’s sales suggests a decline of 12.4% from the year-ago reported numbers.
Associated British Foods is a diversified international food, ingredients and retail group, which currently flaunts a Zacks Rank #1. ASBFY’s expected EPS growth rate for three to five years is 7%.
The Zacks Consensus Estimate for Associated British Foods’ current financial-year sales and earnings suggests growth of 30.4% and 4.2%, respectively, from the year-ago reported figures.
Celsius Holdings currently carries a Zacks Rank #2 (Buy). CELH specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements.
The Zacks Consensus Estimate for CELH’s current financial-year sales indicates 67.9% growth from the year-ago reported figure, and the same for EPS implies a 154% rise. The company had an earnings surprise of 81.8% in the last reported quarter.
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The Clorox Company (CLX) : Free Stock Analysis Report
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