Why Clorox (CLX) Stock is a Long-Term Buy Far Beyond the Coronavirus
Zacks Investment Research | Mar 31, 2020 07:03AM ET
The Clorox Company (NYSE:CLX) CLX sells disinfectant products that kill germs at home and in healthcare settings, which makes it almost tailor-made for the coronavirus economy. CLX stock has climbed in 2020, as the broader market tumbled. Better still, Clorox’s portfolio is far more diverse and it appears to be a solid longer-term buy right now.
Bleach & Beyond
Clorox’s portfolio includes its namesake disinfectant wipes and other offerings geared for household cleaning. The company also boasts products made specifically for the healthcare industry, which includes Clorox Healthcare Bleach. In fact, the company has blog posts about how it aims to help in the battle against superbugs and how it tests disinfectants to the highest standards.
CLX boasts a long list of household and industrial-level cleaners that are currently being used around the U.S. to help combat the ongoing spread of the novel coronavirus. On top of that, the firm’s portfolio includes everything from Kingsford charcoal and Brita water filters to Hidden Valley Ranch and Burt's Bees.
Better still, over 80% of Clorox’s sales are “generated from brands that hold the No. 1 or No. 2 market share positions in their categories.”
Overall, Clorox operates a recession-proof style portfolio, with cleaning making up around 35% of sales. Meanwhile, its household unit, which includes trash bags, cat litter, and more, accounts for 30%. And its lifestyle and international segments make up 20% and 16%, respectively.
Other Fundamentals
The nearby chart helps investors see that CLX shares have outpaced their peers over the last five years, up 58%, against its industry’s 27% average. This outperformance trend looks even better over the past decade, with Clorox shares up 170% to crush its industry’s 90% average—which includes Unilever (LON:ULVR) NV CL —and tops the S&P 500’s 123%.
CLX stock has popped 13% in 2020. Luckily for most long-term investors, the stock has cooled off from a massive one-week run in the middle of March. CLX’s valuation picture is a bit stretched, but it rests below its 12-month highs and is trading close to its five-year median of 23.7X forward 12-months Zacks earnings estimates.
Despite its climb, CLX’s dividend yield comes in at 2.45% right now. This helps its blow away the 10-year U.S. Treasury note’s 0.67%, the S&P 500’s 2.25% average, and its industry’s 2.33%.
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Bottom Line
Clorox topped our Q2 fiscal 2020 earnings and revenue estimates in early February. The company’s earnings revisions have climbed since then to help CLX earn a Zacks Rank #1 (Strong Buy) right now, alongside an “A” grade for Momentum in our Style Scores system.
Clearly, Clorox stock appears to be worth considering in order to combat the current coronavirus economic downturn that has seen giants such as Nike (NYSE:NKE) SBUX , and many others close some stores and or limit operations.
Clorox’s disinfectants, meanwhile, are likely flying off shelves. Therefore, it might be time to buy CLX for this economic setback and far beyond, given its expansive portfolio of everyday household items that are quintessential consumer staples.
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