What Happened?
Shares of consumer products giant Clorox (NYSE:CLX) fell 7% in the afternoon session after the company reported underwhelming fourth quarter results, with revenue down 15%, reflecting inventory normalization and the sale of the Better Health Vitamins, Minerals & Supplements (VMS) and Argentina businesses. This marks a sharp reversal from the 16% growth a year ago. The previous year's numbers got a temporary lift when Clorox restocked stores after the August 2023 cyberattack. That boost didn't repeat, making sales look weaker this quarter. Also, organic sales fell 9%, showing that core operations are struggling. Looking ahead, the company expects full-year sales to stay the same, aside from a 1-2% boost from extra shipments tied to the Enterprise Resource Planning (ERP) switch, which isn't expected to recur.
On the other hand, gross margin improved, thanks to cost savings and the exit from lower-margin businesses. That helped Clorox beat Wall Street's earnings forecasts. The company also raised its full-year EPS outlook, topping expectations. Overall, this was a mixed quarter, with the weak sales forecast likely to raise concerns among investors.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Clorox? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Clorox’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 7.4% on the news that the company reported weak first-quarter results, which missed analysts' revenue expectations, as sales declined in absolute terms. The weak top line performance was attributed to lower volume from temporary distribution losses due to disruptions caused by the cyberattack. Management also called out unfavorable foreign exchange rates.
On the other hand, EPS exceeded analysts' expectations as gross margin improved due to improved pricing and cost savings.
Looking ahead, guidance was mixed: While EPS guidance came in ahead of consensus estimates, the company actually lowered its full year organic revenue growth outlook. Overall, the results could have been better.
Clorox is down 7.8% since the beginning of the year, and at $149.18 per share, it is trading 12.1% below its 52-week high of $169.74 from December 2024. Investors who bought $1,000 worth of Clorox’s shares 5 years ago would now be looking at an investment worth $911.44.
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