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Factors Setting the Tone for Clorox's (CLX) Q1 Earnings

Zacks Equity Research

The Clorox Company CLX is scheduled to release first-quarter fiscal 2020 results on Oct 31, before the opening bell. In the trailing four quarters, the company has outperformed the Zacks Consensus Estimate, recording average positive earnings surprise of 1.9%. It delivered a positive earnings surprise of 1.6% in the last reported quarter.

Let’s see what’s in store for the company this time around.

What to Expect This Time

The Zacks Consensus Estimate for first-quarter earnings has moved south by 5 cents over the past 30 days to $1.54, which suggests a decline of 4.9% from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $1,512 million, indicating a decline of 3.3% from the figure reported in the year-ago quarter.

The Clorox Company Price, Consensus and EPS Surprise

The Clorox Company Price, Consensus and EPS Surprise

The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote

Factors at Play

Clorox has been witnessing operational headwinds in the Charcoal, and Bags and Wraps businesses, which have been hurting its top line for a while now. In the last earnings call, the company projected sales decline for the first quarter. Also, management expects muted earnings in the first half of the fiscal year. Further, impact of higher SG&A expenses and unfavorable currency cannot be ignored.

Nevertheless, the company is progressing well with its growth initiatives — including 2020 Strategy, Go Lean Strategy, enhancement of the e-commerce business and disciplined capital allocation. The company’s 2020 Strategy aimed at improving product categories and enhancing overall market share are likely to have benefited its performance. Further, the company’s Go Lean Strategy in International is likely to have contributed to margins through operational efficiencies. Also, it is committed toward investing in product and brand differentiation to safeguard value proposition. Moreover, Clorox’s focus on investments in demand building through digital marketing, e-commerce and product innovation pipeline is encouraging.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Clorox this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Clorox carries a Zacks Rank #4 (Sell) and Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Church & Dwight CHD has an Earnings ESP of +0.93% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

TreeHouse Foods THS has an Earnings ESP of +1.01% and a Zacks Rank #2.

Target Corporation TGT has an Earnings ESP of +1.79% and a Zacks Rank #3.

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