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Clorox Stock Falls on an Unimpressive Q4 Show, Dismal Guidance

Story Highlights

CLX stock lost more than 6% following weak fourth-quarter results and Fiscal Year 2023 guidance.

Shares of Clorox Co. (NYSE: CLX) dropped 6.1% in Thursday’s pre-market trading session after the company reported unimpressive results for the fiscal fourth quarter (ended June 30) and disappointing guidance for the Fiscal Year 2023.

California-based Clorox manufactures bleach and cleaning products, home care products, grilling products, water-filtration products, personal care products, and food products, among others.

Q4 Results in Detail

A higher tax rate hurt Clorox’s adjusted earnings, which fell 2% year-over-year to 93 cents per share. However, the metric was in line with the Street’s estimate.

Net sales remained flat year-over-year at $1.8 billion. The gain from higher prices was offset by decreased shipments. Gross margin also remained unchanged at 37.1%.

The Household segment’s net sales increased 4% and those of the Lifestyle segment grew 1%. However, net sales of the Health and Wellness segment declined 5%.

Commenting on the results, the CEO of Clorox, Linda Rendle, said, “Over this quarter and the fiscal year, we navigated through challenging operating conditions by taking proactive steps to rebuild margin and invest in the areas of the business that would best position Clorox for long-term success. This has allowed us to report results in line with our expectations and deliver another quarter of sequential margin improvement.”

“Looking to the Fiscal Year 2023, the environment remains difficult, with consumer behaviors adapting to ongoing inflation as well as continued normalization in our cleaning and disinfecting portfolio. We’re addressing these challenges head-on while taking steps to keep our categories healthy and offer superior consumer value,” Rendle added.

Clorox Offers FY23 Outlook

Along with the fourth-quarter results, Clorox has issued guidance for the Fiscal Year 2023. The consumer and professional products manufacturer expects adjusted EPS to range from $3.85 to $4.22, compared to the consensus estimate of $5.26 per share.

Gross margin is anticipated to rise by 200 basis points on the back of supply chain optimization, cost saving, and higher prices. Further, net sales growth is projected to range from (4%) to 2%.

Is Clorox a Buy or Sell?

On TipRanks, Analysts have a Moderate Sell consensus rating on Clorox, which is based on one Buy, two Holds, and four Sells. CLX’s average price target of $134.29 implies 7.1% downside potential.

The consensus rating is supported by Andrea Faria Teixeira of J.P. Morgan (NYSE: JPM), who maintained a Sell rating on the stock last month. Meanwhile, the analyst raised the price target to $132 from $127 (8.7% downside potential).

In a research note to investors, Teixeira said, “While U.S. consumers are still benefiting from higher salaries, some consumption moderation is likely ahead as higher mortgage rates, gas prices and overall inflation should lead to a more cautious consumer.”

Similarly, hedge funds are seen reducing their stakes in the company. TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Clorox is currently Very Negative, as the cumulative change in holdings across all eight hedge funds that were active in the last quarter was a decrease of 1.3 million shares.

Is Clorox Stock Expected to Rise?

CLX stock has lost over 10% in the last year. It has, however, grown 4% in the past six months. The rise is expected to continue as consumption of the company’s products will likely increase following the lifting of COVID-19 restrictions.

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