Why Clorox Stock Fell Close to 7% after Its Fiscal 2Q18 Earnings



Acute selling pressure engulfed the overall market

Stocks of US corporations fell sharply on February 2, 2018, as investors didn’t seem to be in the mood to bargain amid rising interest rates. Index heavyweights such as Alphabet (GOOGL) reported weak earnings. 

The Dow Jones Industrial Average (DJIA) recorded one of its worst falls and declined 666 points on the day. This movement could be a possible reason for Clorox (CLX) stock’s fall of ~7.0% on Friday despite its mixed fiscal 2Q18[1. fiscal 2Q18 ended December 31, 2017] results and increased fiscal 2018 earnings guidance.

Clorox’s (CLX) focus on innovation, a strong product pipeline, and category-leading brands are expected to lift its sales higher in upcoming quarters. However, near-term headwinds such as retailers lowering inventory and an unfavorable mix could subdue its returns.

Article continues below advertisement

Despite improved sales, investors remained concerned about near-term margin pressures stemming from the inflation in commodity prices. Plus, higher manufacturing and transportation costs could hurt its fiscal 3Q18 and fiscal 4Q18 margins. However, cost and productivity savings, higher pricing, and a low effective tax rate are expected to give a significant boost to its earnings.

Stock performance

The chart above shows that stock prices of home and personal care product manufacturers are trading in the red. Low pricing amid increased competition, a tough retail landscape, and cost pressures kept investors away from these stocks.

On February 2, 2018, Clorox (CLX) stock fell ~12.0% on a YTD (year-to-date) basis and has underperformed the benchmark index. The S&P 500 Index (SPX-INDEX) registered growth of 3.3% on a YTD basis. 

Stocks of Clorox’s peers Church & Dwight (CHD), Kimberly-Clark (KMB), Colgate-Palmolive (CL), and Procter & Gamble (PG) marked declines of 7.7%, 3.7%, 4.0%, and 8.3%, respectively.


More From Market Realist