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Clorox Likely to Sustain Momentum, but Valuation Is a Concern



Key growth drivers

We expect Clorox (CLX) to sustain its momentum in sales and earnings in the second half of fiscal 2019. Clorox’s top line is anticipated to benefit from its acquisition of Nutranext. Meanwhile, higher pricing and innovation are expected to support the top-line growth rate. Clorox’s higher pricing and cost savings are expected to drive its bottom line higher. Clorox surpassed analysts’ EPS estimate in the past nine quarters by an average of 4%.

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However, currency volatility and cost headwinds are expected to hurt Clorox’s sales and earnings growth rate. Also, Clorox’s current valuation looks unattractive. Clorox trades at 25.0x its fiscal 2019 estimated EPS of $6.33 and 23.4x its fiscal 2020 estimated EPS of $6.74, both of which look expensive given the projected growth rate of 2.5% and 6.5% in those periods.

Rating and target price

Of the analysts covering CLX stock, ten analysts suggest a “hold,” four analysts recommend a “sell,” and three analysts have a “buy” rating. Analysts have a consensus target price of $150.86 per share on CLX stock, which implies a downside of 4.5% based on its closing price of $157.97 on March 4.

Wall Street maintains a neutral outlook on other major consumer packaged goods companies including Church & Dwight (CHD), Kimberly-Clark (KMB), Colgate-Palmolive (CL), and Procter & Gamble (PG). Moreover, analysts’ target price indicates a slight downside in the stock prices of these companies.


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