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On Tuesday, Clorox Company (NYSE:CLX) shares faced headwinds following a report from Raymond (NSE:RYMD) James that maintained a Market Perform rating after the company’s fiscal third-quarter earnings fell short of expectations. The household products maker reported earnings per share (EPS) of $1.45, which did not meet the Raymond James estimate of $1.57 or the consensus figures of $1.57 and $1.55 from Bloomberg and StreetAccount respectively. According to InvestingPro data, Clorox currently trades at a P/E ratio of 37.7x, suggesting a premium valuation, while maintaining a solid financial health score of 4.24 out of 5 for profitability.
Clorox’s organic sales declined by 2% year-over-year, a figure that contrasted with Raymond James’ projection of flat growth and the StreetAccount consensus of a 1% increase. The company’s sales were affected by a combination of slowing consumption—which dropped 4 percentage points during the quarter before leveling out—and retailers reducing their inventory levels. Despite these challenges, InvestingPro analysis shows that Clorox has maintained dividend payments for 55 consecutive years, with a current dividend yield of 3.53% and a moderate debt level, demonstrating long-term financial stability.
Despite these challenges, Clorox did see some positive developments in its gross margin, which increased by 240 basis points to 44.6%, surpassing both Raymond James’ expectation of 43.7% and the Bloomberg/StreetAccount consensus of 43.8% to 44.0%. Looking ahead to the fiscal fourth quarter and full year 2025, Clorox adjusted its organic sales growth forecast to 4-5% from the previous 4-7%, or 2% when excluding the anticipated sales pullforward into the fourth quarter of 2025 ahead of the first-quarter 2026 enterprise resource planning (ERP) transition. This pullforward is now expected to contribute 2-3 percentage points, up from the previous estimate of 1 point. InvestingPro data reveals that analysts expect net income growth this year, with an EPS forecast of $7.22 for FY2025.
The full-year 2025 EPS outlook remains unchanged at $6.95 to $7.35, but now includes a benefit from the sales pullforward of $0.50 to $0.70, an increase from the prior $0.25 to $0.45. Additionally, the company anticipates gross margin expansion of around 150 basis points, at the higher end of the previously forecasted range of 125 to 150 basis points.
In the broader context of the market, Clorox’s categories are showing signs of weakening, with the Household segment being the most affected. There is concern that promotional activity may increase as consumers face financial pressures and competition intensifies in key areas such as Litter and Bags & Wraps. Despite these market conditions, Clorox managed to maintain its overall market share in the third quarter, and private label share remained stable. However, Raymond James expressed caution regarding the uncertain market environment and decided to uphold its Market Perform rating on Clorox stock.
In other recent news, Clorox has faced a series of analyst downgrades following its recent earnings reports. The company’s fiscal first-quarter 2025 earnings per share (EPS) came in at $1.45, missing the forecasted $1.57, while revenue reached $1.67 billion, below the expected $1.73 billion. This shortfall has led to several firms adjusting their price targets for Clorox. Evercore ISI reduced its target to $140 from $150, maintaining an Underperform rating due to the sales miss. JPMorgan also lowered its price target to $144 from $151, citing a miss in organic sales growth and adjusted EPS expectations. Similarly, Goldman Sachs cut its price target to $134, retaining a Sell rating after Clorox’s revenue and EPS fell short of expectations.
The company’s lowered sales outlook is attributed to a slowdown in consumer demand and retailer destocking. Despite this, Clorox has maintained its EPS growth guidance between 13% and 19% for the fiscal year. Wells Fargo (NYSE:WFC) also adjusted its outlook, decreasing the price target to $142 from $145, while keeping an Equal Weight rating, noting the need for improved visibility into Clorox’s future performance. The company anticipates a temporary increase in shipments as it transitions to a new enterprise resource planning (ERP) system, which is expected to impact organic sales positively in the short term. Clorox’s management remains confident in maintaining market share and household penetration across key channels, despite ongoing challenges in consumer trends and competitive pressures.
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