The Clorox Company CLX is trading above its 200-day simple moving average (SMA), signaling a bullish trend. The company's strategic pricing actions and cost-saving measures are contributing to enhanced gross margins.

The 200-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of a stock’s uptrend or downtrend.

CLX Stock Trading Above 200 Day Moving Average

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CLX has shown impressive momentum, with its stock rallying 19% over the past six months, outperforming its industry’s decline of 4.6% during the same period. Furthermore, Clorox’s performance has surpassed the broader Consumer Staples sector’s 7% decline and the S&P 500's 12.5% increase, showcasing the company's strong market positioning and resilience in a competitive environment.

CLX Stock's Past Six Months Performance

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Should you consider adding CLX stock to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add CLX stock to their portfolio.

Factors Acting as Tailwinds for Clorox

A key factor driving Clorox's success is its streamlined operating model, which focuses on improving efficiency and enhancing profitability. This has led to a significant expansion in gross margins, showcasing the effectiveness of Clorox’s pricing strategies, cost-saving measures and comprehensive margin-management program.

Another key factor driving Clorox's success is its IGNITE strategy, which focuses on the expansion of the key elements to pace up innovation in each area of business. This strategy encompasses the long-term financial targets of achieving net sales growth of 2-4%, EBIT margin expansion of 25-50 basis points and free cash flow generation of 11-13% of sales.

The company intends to invest in transformative technologies and processes over a five-year period. This investment started in fiscal 2022, which includes the replacement of its enterprise resource-planning system, transitioning to a cloud-based platform and the implementation of a suite of digital technologies. Such implementations are expected to generate efficiencies, transforming CLX’s operations such as supply chain, digital commerce, innovation, brand building and others in the long term.

It remains quite focused on advancing its transformation to become a strong and resilient company. Clorox divested its Better Health Vitamins, Minerals and Supplements VMS business in the first quarter of 2025. This divestiture aligns with Clorox's strategy to concentrate on its core areas, potentially unlocking further value for its shareholders. This highlights an important step in the evolution of its portfolio, supporting CLX’s target to lower volatility and boost profitable growth.

CLX’s Near-Term Concerns Prevail

Clorox’s transformation strategy is focused on long-term growth, but it may face short-term challenges, particularly regarding profitability and execution risks. The company’s strategic investments are influencing its cost structure, with a notable increase in advertising and sales promotion spending, expected to represent 11-11.5% of net sales in fiscal 2025, reflecting Clorox’s continued commitment to brand development.

Additionally, selling and administrative expenses are forecasted to account for 15-16% of net sales, driven by investments in digital and productivity improvements. A significant portion of these digital investments will be reflected as incremental operating costs, impacting the company's reported earnings per share (EPS).

In light of a challenging macroeconomic environment and consumer pressures, Clorox anticipates its fiscal 2025 net sales will remain flat or decline by up to 2% compared to the previous year.

CLX: In a Nutshell

Clorox is focused on long-term growth through a streamlined operating model and the IGNITE strategy, aimed at improving efficiency and expanding margins. While these efforts have driven operational improvements, the company faces short-term challenges related to profitability, execution risks and increased costs from strategic investments in brand development and digital capabilities. Clorox carries a Zacks Rank #3 (Hold).

Three Picks You Can't Miss

We have highlighted three better-ranked stocks in the broader sector, namely Freshpet, Inc. FRPT, United Natural Foods, Inc. UNFI and Tyson Foods TSN.

Freshpet, together with its subsidiaries, manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently sports a Zacks Rank of #1 (Strong Buy). FRPT delivered an earnings surprise of 144.5% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current fiscal year’s sales and earnings implies growth of 27.2% and 228.6%, respectively, from the year-ago reported number.

United Natural currently sports a Zacks Rank of 1. UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average.

The consensus estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.

Tyson Foods, a meat products behemoth, currently flaunts a Zacks Rank #1. TSN delivered a trailing four-quarter average earnings surprise of around 57%.

The consensus estimate for Tyson Foods’ current fiscal-year sales and earnings indicates growth of about 2% and 13.6%, respectively, from the prior-year reported levels.

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The Clorox Company (CLX) : Free Stock Analysis Report

Tyson Foods, Inc. (TSN) : Free Stock Analysis Report

Freshpet, Inc. (FRPT) : Free Stock Analysis Report

United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report

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