Clorox’s stock is down about 18% this year in a bull market, but it is not out as a long-term investment.
There have been better times and worse times for Clorox’s shares. The better times were during the early days of the pandemic in the spring of 2020, when demand for its cleaning and disinfecting products was soaring, sending the company’s shares north.
The worse times have been the last twelve months, as the easing of the pandemic and rising material costs have taken their toll on the company’s top and bottom lines, sending its shares south. I’m neutral on CLX shares. (See today’s best-performing stocks on TipRanks)
TipRanks’ Smart Score
According to TipRanks’ Smart Score rating system, CLX scores a 2 out of 10, giving it an Underperform rating. Negative sentiment from analysts and TipRanks investors, as well as hedge fund selling and negative technicals, are the reasons for the low rating.
Things Could Get Better for Clorox
Despite the negative sentiment, things could look better in 2022 for the Oakland, California-based company, as it has addressed several issues of the transition from the pandemic to the post-pandemic era.
“We’re off to a solid start in the Fiscal Year 2022 and saw stronger-than-anticipated demand across our portfolio, despite a challenging operating environment,” said CEO Linda Rendle. “We made meaningful progress on restoring supply — which contributed to holding or gaining market share in the vast majority of our businesses — and we’re pulling multiple levers to manage through this inflationary period. This includes pricing actions and stepping up our cost reduction initiatives, which will help us rebuild margins and create fuel to reinvest in the business.”
Q1 Earnings Beat Estimates
Rendle’s comments follow the release of the company’s Q1 2022 financial results. EPS came in at $1.14, down from $3.22 in the year-ago quarter. The decrease was due to a lower gross margin, lower net sales, and a one-time, non-cash remeasurement gain in the year-ago quarter from an investment in the Kingdom of Saudi Arabia joint venture.
Nonetheless, these results beat analyst estimates. Meanwhile, net sales dropped 6% to $1.8 billion, compared to a 27% increase in the year-ago quarter, or an increase of 21% on a two-year stack basis.
A Company for Good and Bad Times
Clorox has been around for a long time, transforming itself from a bleach manufacturer in the early 1900s to a manufacturer and distributor of a broad array of cleaning and wellness products today.
These are products that consumers buy in good and bad times, meaning the company has been doing well both in economic expansions and contractions, delivering superior returns to its shareholders. Over the last three decades, Clorox’s shares have gained 578% compared to 312% of the S&P500.
Wall Street’s Take
Turning to Wall Street, CLX has a Moderate Sell consensus rating based on one Buy, six Holds, and five Sell ratings assigned in the past three months. At $158.82, the average Clorox price target implies 4.5% downside potential.
Price targets range from a high of $194.00 to a low $131.00.
The Bottom Line
Clorox’s stock deserves a close look from investors with a multi-year investment horizon, rather than 12 months.
Disclosure: At the time of publication, Panos Mourdoukoutas owned shares of Clorox.
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