On May 31, 2016, Clorox (CLX) was trading at $128.54, a fall of 0.7% since its fiscal 3Q16 earnings were released. The company’s stock was trading at its two-year peak of $132.88 on May 12, 2016.
Clorox’s stock has consistently moved up since the beginning of 2015. The company’s stock price rose by 1.9% to $129.43 after it released its earnings on May 3, 2016.
Stock price versus peers
The increase in stock movement was primarily due to the announcement of the Renew Life acquisition on the same day. Clorox’s stock is up by 23.8% since January 2015, and it is up by 2.6% year-to-date (or YTD). Similarly, the benchmark S&P 500 Index (SPY) (IVV) (VOO) is up by 1.9% since January 2015 and by 4.1% YTD.
The stock prices of Church & Dwight (CHD), Kimberly-Clark (KMB), and Colgate-Palmolive (CL) rose by 24.5%, 9.9%, and ~2%, respectively, since January 2015. However, the stock price of Procter & Gamble (PG) fell by 10.4%.
Renew Life acquisition
Renew Life is a digestive supplement maker that Clorox acquired on May 3, 2016, for $290 million in cash. Renew Life generated sales of ~$115 million in 2015. With the acquisition of Renew Life, Clorox plans to expand its Consumer Products portfolio into the probiotics space. This is expected to complement Clorox’s Global portfolio as the digestive health market in the US represents sales of more than $10 billion, growing by 7% annually.
According to Clorox’s chief executive officer, Benno Dorer, the probiotics subcategory earns ~$1.3 billion annually in the US, and it is expected to grow by 15% per year. This acquisition should enable Clorox to expand its Health and Wellness category, as well as to accelerate its growth through economically attractive brands in mid-sized categories and leverage core competencies.
With robust fiscal 3Q16 results and the acquisition announcement, Clorox stock saw an upward trend. Later in this series, we will discuss key highlights from Clorox’s fiscal 3Q16 results.