Can Clorox (CLX) Retain Earnings Beat Trend Despite All Odds?

Zacks Investment Research | Jan 28, 2019 07:14AM ET

The Clorox Company (NYSE:CLX) is slated to report second-quarter fiscal 2019 results on Oct 31. A glimpse of the company’s earnings performance shows that it delivered positive surprise in the trailing eight quarters. It recorded average positive earnings surprise of 3.3% in the last four quarters.

The Zacks Consensus Estimate for earnings in the fiscal second quarter is pegged at $1.32, which reflects growth of 7.3% year over year. Earnings estimates remained unchanged in the last 30 days. Let’s see how things are shaping prior to the earnings announcement.

The Clorox Company Price, Consensus and EPS Surprise

industry ’s 4.8% growth.

Despite gains from cost-saving and productivity initiatives, the company continues to witness significant pressure on gross margin, owing to elevated commodity, manufacturing and logistics expenses. This remains a major concern in the to-be-reported quarter as clear from its guidance. Though management expects gross margin expansion in the second half of fiscal 2019, gross margin is likely to remain soft in the first half, owing to higher costs.

For fiscal 2019, the company estimates gross margin to be flat as gains from higher prices and cost-savings efforts are expected to be offset by increased costs, and adverse foreign currency exchange rates. Additionally, the company lowered earnings projections for fiscal 2019 due to expectations of making fewer share repurchases in fiscal 2019 than nearly 50% of the $2-billion share repurchase authorization mentioned earlier. Adverse impacts from foreign currency and higher costs also hurt the earnings forecast.

Consequently, management anticipates earnings per share from continuing operations to be $6.20-$6.40 in fiscal 2019.

What the Zacks Model Predicts

Our proven model does not conclusively show that Clorox is likely to beat earnings estimates in second-quarter fiscal 2019. This is because a stock needs to have both — a positive Original post

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Written By: Zacks Investment Research

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