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Clorox Stock Rose on Strong Fiscal 4Q17 Results

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Part 2
Clorox Stock Rose on Strong Fiscal 4Q17 Results PART 2 OF 7

The Factors behind Clorox’s Fiscal 4Q17 Earnings Beat

EPS exceeds estimate

Clorox (CLX) reported better-than-expected fiscal 4Q17 earnings on August 3, 2017. Clorox’s EPS (earnings per share) of $1.53 surpassed analysts’ estimate of $1.49 and jumped 21.4% YoY (year-over-year).

As for fiscal 2017, the company’s EPS of $5.33 beat Wall Street’s estimate and increased 8.3% on a YoY basis.

The Factors behind Clorox’s Fiscal 4Q17 Earnings Beat

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Digging deeper

Clorox’s fiscal 4Q17 bottom line was driven by increased sales, reflecting higher volumes and pricing. Besides, productivity and cost savings further supported its EPS growth. The company’s EPS also got a boost from the lower effective tax rate, which came in at 31.7% compared to 34.3% in fiscal 4Q16.

However, an unfavorable product mix, inflation in commodity prices, and higher manufacturing and logistics costs remained a drag in the fourth quarter for Clorox.

In comparison, the bottom line for most of the company’s peers benefited from cost-cutting initiatives as sales remained sluggish. Higher commodity prices took a toll on their profitability. For instance, Colgate-Palmolive’s (CL) 2Q17 EPS came in line with analysts’ estimates and increased 2.9% YoY due to productivity and cost savings. 

Procter and Gamble’s (PG) fiscal 4Q17 EPS rose 7.6% YoY as an adverse impact from the unfavorable mix and higher commodity costs were offset by lower costs and increased productivity savings.

In contrast, Kimberly-Clark’s (KMB) 2Q17 EPS decreased 2.6% YoY as lower sales and higher raw material costs more than offset the benefits of productivity savings. Church & Dwight’s (CHD) 2Q17 earnings fell 4.7% due to increased marketing and promotional spending.

Fiscal 2018 outlook

Clorox’s management projects its fiscal 2018 EPS to be in the range of $5.52–$5.72, reflecting an increase of 3%–7%. Increased sales, higher pricing, and cost-saving measures could drive the company’s bottom-line results in fiscal 2018. However, increased competition, rising commodity costs, and higher manufacturing and logistics costs are expected to restrict the company’s bottom-line growth.

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