The Clorox Company CLX is slated to report second-quarter fiscal 2020 results on Feb 4, before the market opens. This Oakland, CA-based manufacturer and marketer of consumer products has a trailing four-quarter positive earnings surprise of 2.2%, on average. Investors are counting on another beat by Clorox in the to-be-reported quarter. If all goes well, this will be the third straight quarter of earnings beat.
Key Factors to Note
Clorox has been witnessing operational headwinds in the Charcoal, and Bags and Wraps businesses, which have been hurting its Household segment, and in turn the top line for a while now. Management had earlier guided a decline in sales during first-half fiscal 2020. In the last earnings call, the company projected sales decline for the quarter under review, primarily due to unfavorable currency environment, partly offset by growth in organic sales. Meanwhile, the Zacks Consensus Estimate for total revenues suggests year-over-year decline of 3% to $1,429 million.
We note that the Zacks Consensus Estimate for sales for Household segment is pegged at $365 million, which indicates year-over-year decline of 7%. Meanwhile, the consensus estimates for sales for Cleaning and International segments stand at $488 million and $233 million, which suggest declines of 2.5% and 5%, respectively, from the year-ago period. However, the consensus estimates for Lifestyle segment indicates an improvement of 5% to $352 million.
Notably, headwinds related to trade promotional spending, unfavorable mix, manufacturing and logistics expenses, and advertising and sales promotion spending cannot be ignored. These might show on margins, and in turn the bottom line. The consensus estimate for earnings is pegged at $1.31, which indicates a decline of 6.4% from the year-ago quarter.
Nevertheless, to mitigate the impact of aforementioned headwinds, the company has been concentrating on pricing and cost containment efforts. It is progressing well with its IGNITE Strategy that focuses on maximizing opportunities in core international business and concentrates on increasing demand for more sustainable products such as new Clorox compostable cleaning wipes.
The Clorox Company Price, Consensus and EPS Surprise
The Clorox Company price-consensus-eps-surprise-chart | The Clorox Company Quote
What the Zacks Model Unveils
Our proven model does not 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Clorox has an Earnings ESP of +0.86%, it carries a Zacks Rank #4 (Sell).
3 More Stocks With a Favorable Combination
Here are three other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Zumiez ZUMZ has an Earnings ESP of +0.24% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Colgate-Palmolive CL has an Earnings ESP of +1.37% and a Zacks Rank #2.
Ross Stores ROST has an Earnings ESP of +2.84% and a Zacks Rank #2.
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