Despite macroeconomic headwinds and inflationary input cost situation, Clorox Corporation (CLX) posted better-than-expected first-quarter 2012 results. During the quarter, earnings per share declined 7 cents to $1.01 compared with the prior-period earnings of $1.08. However, quarterly earnings handily beat the Zacks Consensus Estimate of 92 cents per share.
Clorox’s net sales during the quarter gained 3.0% year over year to $1,305.0 million from $1,266.0 million in the year-ago quarter, primarily driven by product innovation and increased pricing. Total revenue beats the Zacks Consensus Estimate of $1,294.0 million. Total volume in the quarter expanded 2% as the company benefited from volume gains from Household, Lifestyle and International segments, partially offset by volume decline in Cleaning segment.
Revenue by Segment
Clorox’s sales in the Cleaning segment inched down 2.0% due to a 1.0% growth in volume. The decrease in segment volume was mainly attributable to lower shipments in the Laundry business, partially offset by higher shipments in the Home Care business.
Household segment sales climbed 3.0% primarily due to a 5.0% volume growth. Higher volumes resulted from growth in Cat Litter and Bags & Wraps and higher shipments of Kingsford charcoal.
Clorox’s Lifestyle segment recorded a 6.0% sales jump in the quarter compared with the base period, a year ago, on the back of volume growth of 6.0%. Increase in volume was supported by trade promotion spending. The volume growth was primarily driven by higher shipments in all three business units.
In the International segment, Clorox’s sales grew 9.0%, primarily driven by a growth of 3.0% in volume resulting from expansion in China and distribution gains in Asia and the Middle East.
Margins
Clorox’s gross margin decreased 250 basis points (bps) to 41.8% from 44.3% in the year-ago quarter due to increased commodity costs, manufacturing and logistics costs and product mix. This was partially offset by the benefit of price increases and prudent cost savings in the quarter.
Balance Sheet and Cash Flow
At quarter end, Clorox had cash and cash equivalents of $270.0 million and long-term debt of $2,122.0 million compared with a cash balance of $286.0 million and a long-term debt of $2,124.0 million in the year-ago quarter.
The company bought back 129,000 shares of the company's common stock for $9.0 million.
Guidance
Looking ahead, Clorox continues to anticipate annual earnings of $4.00 to $4.10 per share on 1% to 3% growth in sales for fiscal 2012. Gross margin is expected to remain flat. Moreover, the company expects to generate a free cash flow of about 10.0% of sales in fiscal 2012.
Clorox Corporation, which competes with companies like Colgate-Palmolive Company (CL) and Procter and Gamble Company (PG), currently has a Zacks #3 Rank, implying a short-term ‘Hold’ rating on the stock. We have a long-term ‘Neutral’ recommendation on the stock.
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