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.
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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.
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.