The Clorox Company CLX has been doing well, thanks to its robust business strategies. The company’s efforts to expand its international foothold seem encouraging. CLX’s pricing and cost-saving initiatives have been bolstering its gross margins for a while. Management continues to explore international opportunities.

CLX’s Strategies Aid Rally

CLX is quite focused on advancing its transformation to become a strong and resilient company. It is focused on value creation in the long run. Aligning with its strategic priorities, Clorox has completed the sale of its Better Health Vitamins, Minerals and Supplements business to Piping Rock Health Products. 

This divestiture supports Clorox’s focus on core areas and aims to unlock additional shareholder value. This highlights an important step in the evolution of its portfolio, supporting CLX’s target to lower volatility and boost profitable growth. Hence, the company concentrates on offering superior value to its consumers by investing in its brands and making innovations. 

Further, Clorox’s pricing and cost-saving initiatives have aided it in delivering the ninth consecutive quarter of gross margin expansion in second-quarter fiscal 2025. This led to a gross margin expansion of 30 basis points year over year in the reported quarter. Additionally, the company remains on track to fully restore the gross margin by fiscal 2025.

CLX has been on track with its streamlined operating model, which aims to improve efficiency. Clorox is on track with the IGNITE strategy, its integrated strategy, which focuses on the expansion of the key elements along with innovation in each area of business. CLX strengthens its competitive advantage, hence accelerating profitable growth and preparing for long-term success.

Bumps in CLX’s Growth Path

Clorox has been witnessing an uncertain macro landscape. Management expects fiscal 2025 net sales to decline 1% to grow 2% compared with flat to down 2% mentioned earlier. Gross margin growth for fiscal 2025 is likely to be partly offset by cost inflation and higher trade promotional expenses.

Clorox has been accelerating investments to enhance digital capabilities. In second-quarter fiscal 2025, advertising expenses rose 2.7% year over year to $191 million. For fiscal 2025, advertising and sales promotion spending is projected to be 11-11.5% of net sales, driven by CLX’s continued commitment to brand investment. 

Selling and administrative expenses are forecasted to be between 15% and 16% of net sales, indicating a 150-basis-point impact of strategic investments in digital capabilities and productivity enhancements.

CLX’s Valuation

Going by the price/earnings ratio, Clorox stock is currently trading at 22.39 on a forward 12-month basis, slightly higher than 21.55 for the industry.

Conclusion

Buoyed by the aforesaid initiatives, Clorox stock has gained 3.6% in a year compared with the industry’s 12.1% growth. Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for Clorox’s fiscal 2025 earnings per share (EPS) has risen 5.1% to $7.15 in the past 30 days. 

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For fiscal 2025, the consensus estimate for CLX’s sales and EPS implies growth of 0.8% and 15.9%, respectively, year over year. CLX stock currently has a Zacks Rank #3 (Hold).

Three Stocks Looking Good

The Chef's Warehouse CHEF, which is a distributor of specialty food products in the United States, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CHEF has a trailing four-quarter earnings surprise of 34%, on average. 

The Zacks Consensus Estimate for CHEF’s current financial-year sales and EPS indicates growth of 5.7% and 17.7%, respectively, from the year-ago numbers.

Post Holdings POST, which is a consumer-packaged goods holding company, has a Zacks Rank of 2 at present. POST has a trailing four-quarter average earnings surprise of 22.3%.

The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and EPS implies growth of 0.3% and 2.2%, respectively, from the year-ago numbers.

Utz Brands UTZ, which has a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 8.8%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and EPS indicates growth of 1.2% and 10.4%, respectively, from the year-ago number.

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The Clorox Company (CLX) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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