Clorox Stock Falls on Unimpressive Q4 Show, Dismal Guidance

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Clorox Co. Shares (NYSE: CLX) fell 6.1% in Thursday’s premarket trading session after the company reported unimpressive results for the fourth fiscal quarter (ended June 30) and disappointing guidance for fiscal 2023.

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

Fourth quarter 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 estimate.

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

Net sales in the Household segment increased by 4% and those in the Lifestyle segment by 1%. However, net sales in the Health and Wellness segment decreased by 5%.

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

“Looking to fiscal 2023, the environment remains challenging, with consumer behavior adjusting to ongoing inflation as well as the continued normalization of our cleaning and disinfection portfolio. We note these challenges head-on while taking steps to keep our categories healthy and deliver superior value to consumers,” added Rendle.

Clorox Offers Fiscal 23 Outlook

Along with fourth quarter results, Clorox released guidance for fiscal year 2023. The consumer and professional products maker expects adjusted EPS to be between $3.85 and $4.22, compared at the consensus estimate of $5.26 per share.

Gross margin is expected to increase by 200 basis points due to supply chain optimization, cost reduction and price increases. In addition, net sales growth is expected to be between (4%) and 2%.

Is Clorox a buy or a sell?

On TipRanks, analysts have a moderate sell consensus rating on Clorox, which is based on one buy, two hold, and four sell. CLX’s average price target of $134.29 implies a downside potential of 7.1%.

The consensus rating is supported by JP Morgan’s Andrea Faria Teixeira (New York Stock Exchange: JPM), which 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 continue to benefit from higher wages, some moderation in consumption is likely as rising mortgage rates, gasoline prices and ‘headline inflation should lead to a more cautious consumer.’

Similarly, hedge funds are seen to reduce their stakes in the company. TipRanks’ Hedge Fund Trading Activity Tool shows that sentiment in Clorox is currently very negative, as the cumulative change in holdings in the eight hedge funds that were active over the last quarter was a decrease of 1. 3 million shares.

Should Clorox Stock Rise?

CLX stock has lost more than 10% over the past year. However, it has increased by 4% in the last six months. The rise is expected to continue as consumption of the company’s products will likely increase following the lifting of COVID-19 related restrictions.

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