The Clorox Company CLX looks attractive on the back of its brand management initiatives, focus on e-commerce model and 2020 Strategy. Also, the company has delivered a robust start to fiscal 2018 as both first-quarter earnings and sales topped estimates and improved year over year.
Consequently, the stock scaled a 52-week high $149.90 on Dec 22, though it closed a tad lower at $149.52. In the past three months, the company’s shares have gained 15.6%, outperforming the industry’s growth of 0.6%.
.jpg)
Let’s make a detailed analysis of the stock.
2020 Strategy – A Long-Term Growth Driver
Clorox remains keen on the smooth execution of its 2020 Strategy, which is aimed at boosting growth for the improvement of categories and overall market share. In fact, the whole strategy is meant to achieve certain long-term aspirations including growing net sales by 3-5%, increasing operating margin by 25-50 basis points and generating free cash flow of 10-12% of sales, all on a yearly basis.
The strategy is likely to be achieved through key accelerators like investment in brands, development of e-commerce, technological advancements, enhancement of growth culture and focus on the 3Ds – desire, decision and delight.
Brand Strength & E-Commerce
Clorox's diversified brand portfolio positions it well ahead of peers to generate above-average industry growth. Further, it is focused on strong investments in demand building including digital marketing, e-commerce and product innovation. Also, the company’s Go Lean strategy in International remains focused on improving margins through operational efficiencies.
Meanwhile, Clorox is keen on making strategic partnerships with retail customers and evolving capabilities offline as well as online. Apparently, the company recorded nearly 40% annual growth in e-commerce sales in the last two fiscal years.
Bottom Line
Though the company has also been gaining from its efficient cost-saving initiatives and improved international pricing, management trimmed its guidance for fiscal 2018. Earnings are now envisioned in the range of $5.47-$5.67 per share owing to the hurricane-related impacts and the divestiture of the Aplicare business. Further, inflation and high commodity and logistics costs may dent gross margin.
Nevertheless, Clorox has a Zacks Rank #3 (Hold) with a VGM Score of B and a long-term earnings growth rate of 6.6%, which boost investors’ optimism on the stock.
Do Consumer Staples Stocks Appeal You, Check These
Some better-ranked stocks in the Consumer Staples space include The Procter & Gamble Company PG, Nomad Foods Limited NOMD and Lamb Weston Holdings, Inc. LW. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Procter & Gamble has a long-term earnings growth rate of 7.5%. Also, the company’s earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters by an average of 3.7%.
Nomad Foods has delivered a positive earnings surprise of 26.1% in the last quarter.
Lamb Weston, with a long-term earnings growth rate of 5.7% has pulled off an average positive earnings surprise of 11% in the trailing four quarters.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment