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Why Analysts Expect Clorox’s Earnings to Fall in Fiscal 2Q18

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Analysts’ consensus estimate

Clorox (CLX) is expected to announce its fiscal 2Q18 earnings on Friday, February 2, 2018. Analysts expect Clorox to report adjusted earnings of $1.23 per share, a YoY (year-over-year) decline of 1.6%. The anticipated pressure on margins from input cost inflation could hurt the company’s bottom-line growth. The company has exceeded analysts’ expectations in the past four quarters.

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Here’s what could hurt CLX’s 2Q EPS

Clorox’s fiscal 2Q18 earnings are likely to be negatively impacted by inflation in commodity prices. Meanwhile, higher packaging and logistics costs, which were aggravated by recent hurricanes, could hurt its EPS in the near term. In anticipation of margin pressure, the company’s management lowered its full-year EPS outlook during the last quarter’s conference call. Clorox now expects its fiscal 2018 earnings to be in the range of $5.47–$5.67 per share, down from its earlier expectation of $5.52–$5.72. Besides cost pressure, weak top-line performance owing to the divestiture of the Aplicare business could also hurt the company’s profitability.

However, the company’s ability to restructure its pricing, category leading brands, cost-savings, and lower effective tax rate should cushion the company’s earnings.

In comparison, the bottom-line result of the company’s peers was also adversely impacted by inflation in commodity prices, higher raw and packing material costs, and a decline in pricing due to the heightened competitive environment.

During the recently reported quarter, Procter & Gamble’s (PG) bottom line took a beating from price investments and higher input costs. However, the company’s fiscal 2Q18 EPS rose about 10.0%, benefitting from lower taxes, favorable currency rates, and cost savings. Meanwhile, Kimberly-Clark’s (KMB) 4Q17 earnings rose 8.3%. However, increased commodity costs remained a drag and restricted the bottom-line growth. Also, Colgate-Palmolive’s (CL) 4Q17 earnings remained flat as benefits from improved volumes and cost-savings were offset by higher costs and lower pricing.

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