Clorox Stock: A Defensive Play in a Stormy Economy

Key Points

• Clorox manufactures personal care, kitchen, and household products for consumers worldwide.
• Clorox improved its Q4 2024 gross margin by 380 bps to 46.5% from 42.7% in the year-ago period thanks to lower manufacturing and logistics costs, commodity costs, and its cost savings initiatives.
• Clorox beat fiscal Q4 2024 EPS estimates but missed top-line estimates largely from divesting its Argentina business.

Leading consumer products company Clorox Co. NYSE: CLX stock surged 7.4% on a strong fiscal Q4 2024 earnings performance. The maker of personal care, cleaning, and kitchen products has been in negative normalization since its anomalous pandemic surge, peaking its shares at $239.87 in August 2020. The post-pandemic era has proven to be sticky for the company as cleaning and sanitary product use reached a new normal with consumers. The pandemic made consumers painfully aware of the dangers of bacteria, viruses, and germs that they're exposed to every day. This newfound awareness has had a material impact on Clorox, as indicated by its recent earnings beat. 

Clorox operates in the consumer staples sector and competes with consumer products manufacturers like Kimberly-Clark Co. NYSE: KMB,  Proctor & Gamble Co. NYSE: PG and Colgate-Palmolive Co. NYSE: CL.

Clorox’s Portfolio of Brands May Surprise You

Clorox is well known for its bleach and household cleaning products. However, like most major consumer products giants like PepsiCo Inc. NASDAQ: PEP or Conagra Brands NYSE: CAG, they have expanded their brand portfolio beyond their namesake and flagship products. Its brands are split into three categories: Cleaning & Home Care, Around the House, and Wellness.

Clorox Cleaning & Home Care products portfolio includes Clorox, Pine-Sol, S.S.S. Formula 409, Handi Wipes, Ready Mop, RenewLife, Tilex, Wash N Dri, Glad, Liquid-Plumr, Ever Clean, and Poett. Its home goods brands include Brita, Fresh Step, Glad, Kingsford, and Hidden Valley. Its wellness brands include Burt's Bees, Stop Aging Now, Neocell, Natural Vitality CALM, RewnewLife, and Rainbow Light supplements and vitamins. 

CLX Attempts to Break Out of its Rectangle Channel

The daily candlestick chart for CLX illustrates a rectangle channel breakout pattern. This channel caps the upside with a flat-top upper trendline resistance at $138.85 and the downside with a flat-bottom lower trendline support at $130.37. The fiscal Q4 2024 earnings report triggered a breakout that surged shares up to $145.00. The gap fill levels from its Q3 2024 earnings reaction are at $142.18 and $146.60. The daily relative strength index (RSI) surged to the 70-band. Pullback support levels are at $142.18, $138.85, $135.17, and $133.07.

Clorox Reports a Bottom-Line Beat But Misses Top-Line Estimates

Clorox reported fiscal Q4 2024 EPS of $1.82, beating consensus estimates by 27 cents. Revenues fell 5.7% YoY to $1.90 billion, missing consensus estimates of $1.95 billion. The impact of the Argentina divestiture, lower volumes, and unfavorable price mix drove revenue miss. Organic sales fell 3% YoY. Gross margin rose 380 bps to 46.5%, up from 42.7% in the year-ago period. This was largely due to lower manufacturing and logistics expenses as well as benefits from its cost savings initiatives and falling commodities costs, which were partially offset by higher trade promotion spending. The company will divest its Better Health Vitamins, Minerals and Supplements (VMS) business to Piping Rock Health Products LLC.

Clorox Issues Mixed Guidance

Clorox expects fiscal Q1 2025 EPS of $6.55 to $6.80 versus $6.48 consensus estimates. Full-year 2025 revenues are expected to be flat to down 2% YoY or $6.95 billion to $7.09 billion, falling short of $7.32 consensus estimates.

Clorox CEO Linda Rendle commented, "We closed out the fiscal year with strong margin expansion and double-digit adjusted EPS growth despite substantial disruption and consumption loss from the cyberattack. While fully restoring supply and distribution, as well as recovering nearly all of our market share, we remained relentless in driving our IGNITE strategy forward.”

Rendle concluded, “We made strong progress as we evolved our portfolio to accelerate profitable growth, completed the implementation of our streamlined operating model, and advanced our digital transformation. We achieved all of this while continuing to invest strongly behind our brands to provide superior value in a challenging environment where consumers continue to seek value.”

Clorox analyst ratings and price targets are at MarketBeat. There are 18 analyst ratings on CLX stock, comprised of 12 Holds and six Sells. Clorox stock trades at 22.2x fiscal 2025 EPS estimates and pays a 3.33% annual dividend percentage yield.