Why Clorox Stock Is Underperforming Peers



Stock performance

Clorox (CLX) stock was trading flat on a year-to-date basis as of April 24, and it has underperformed the broader markets as well as its peers. In comparison, the S&P 500 Index has grown 16.8% so far this year. Meanwhile, Kimberly-Clark (KMB), Church & Dwight (CHD), Procter & Gamble (PG), and Colgate-Palmolive (CL) registered gains of 9.2%, 11.4%, 12.8%, and 15.7%, respectively.

Improved organic sales, driven by higher pricing and a favorable mix, drove the stock prices of these consumer packaged goods (or CPG) companies higher. However, Clorox stock remained under pressure, reflecting distribution losses and persisting challenges in the charcoal business. Also, tariffs are expected to hurt Clorox’s EPS by $0.05 to $0.07 in fiscal 2019.

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Will Clorox stock rise on the Q3 results?

Analysts expect Clorox’s top line to continue to benefit from innovation, acquisition, and higher pricing. However, currency volatility is expected to drag the sales growth rate down. Clorox’s profit margins could benefit from higher pricing and cost savings. However, inflation in commodity costs is expected to take a toll on margins.

Analysts expect Clorox’s bottom line to show healthy growth on both year-over-year and sequential bases, driven by higher pricing, a lower effective tax rate, and share buybacks.

However, ongoing challenges in the Household segment (which includes the Charcoal, Bags and Wraps, Digestive Health, and Cat Litter businesses) could continue to hurt. Also, Clorox’s high valuation and low growth expectation could limit the upside in the stock.


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