Once a pandemic star, consumer products maker The Clorox Company (NYSE: CLX) is now struggling due to tough comparisons, high inflation, and supply chain issues.
Back in February, the company reported dismal Q2 FY22 results and provided weak guidance, which pulled down the stock. Clorox shares have declined 15% year-to-date.
While Clorox is widely known for its cleaning products, the company also sells health supplements, bags and wraps, personal care products, and several other consumer products.
Clorox is scheduled to announce its Q3 FY22 results on May 2.
Q3 FY22 Expectations
Clorox’s Q2 FY22 (ended December 31, 2021) revenue declined 8% year-over-year to $1.7 billion due to lower volumes. The company’s adjusted EPS declined 67% to $0.66 due to weak sales, higher manufacturing and logistics costs, and increased commodity costs.
Clorox expects FY22 sales to decline by 1%-4%. Notably, it anticipates sales to return to its long-term sales growth target of 3%-5% by Q4 FY22. The company forecast FY22 adjusted EPS of $4.25-$4.50, reflecting a decline in the range of 38%-41%.
Analysts expect the company’s Q3 FY22 sales to rise 1.7% to $1.81 billion, while adjusted EPS is pegged at $0.99, reflecting a decline of about 39%.
Clorox expects cost pressures to continue through FY22. To mitigate the impact of increased costs, the company has been increasing the prices of its products and enhancing productivity.
Wall Street’s Take
J.P. Morgan analyst Andrea Faria Teixeira increased her price target on Clorox stock to $126 from $123 but maintained a Sell rating. The analyst expects most of the 14 household and personal care companies that she tracks to report solid Q1 revenue.
However, Teixeira feels that management teams will likely issue a more cautious outlook for the rest of the year due to inflation and higher cost pressures.
Meanwhile, Barclays analyst Lauren Lieberman lowered her price target on Clorox to $117 from $132 and reiterated a Sell rating to reflect a more difficult external cost environment.
Overall, the Street is also bearish on Clorox, with a Moderate Sell consensus rating based on one Buy, three Holds, and eight Sells. The average Clorox price target of $135 implies further downside potential of 8.99% from current levels.
Conclusion
Clorox is expected to struggle amid a high inflation environment. Given the subdued top-line growth estimates, analysts expect the company’s profitability to be under pressure in the upcoming quarters. Any unfavorable revisions to the company’s full-year outlook might drag down its shares further.
On the TipRanks’ Smart Score rating system, Clorox has a score of 1 out of 10, which suggests that it is likely to underperform the broader market.
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