The Clorox Company (CLX), the non-durable consumer goods retailer, is slated to release its second-quarter fiscal 2014 results on Feb 4, 2014. In the previous quarter, it reported a positive earnings surprise of 4.0%. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
The California-based company reported better-than-expected first-quarter earnings, primarily driven by increased pricing, higher volume and effective cost management, partially offset by adverse foreign currency exchange rates and increase in manufacturing and logistics costs as well as commodity costs. Clorox also reported a marginal year-over-year improvement in net sales, benefiting from the aforementioned factors clubbed with favorable product mix. Gross margins remained flat, whereas operating margin moderately improved year over year.
Earnings Whispers?
Our proven model does not conclusively show that Clorox is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.
Positive Zacks ESP: ESP for Clorox is 2.20%. This is because the Most Accurate estimate stands at 93 cents, while the Zacks Consensus Estimate is pegged at 91 cents.
Zacks Rank #4 (Sell): Clorox’s Zacks Rank #4 when combined with a positive ESP makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows these have the right combination of elements:
Herbalife Ltd. (HLF) has an Earnings ESP of 1.71% and a Zacks Rank #1 (Strong Buy).
Foot Locker Inc. (FL) has an Earnings ESP of 1.33% and a Zacks Rank #2 (Buy).
Finish Line Inc. (FINL) has an Earnings ESP of 1.18% and a Zacks Rank #2 (Buy).
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