Clorox (CLX) stock fell 7.2% on May 1 following the company’s weaker-than-expected third-quarter of fiscal 2019 (period ended March 31) results. Clorox’s top line fell short of analysts’ estimate as competitive headwinds, distribution losses, and adverse currency rates dragged net sales growth down. However, benefits from an acquisition, higher net price realization, and innovation supported the YoY improvement in sales.
The company’s bottom line improved YoY driven by higher pricing, cost savings, and a decline in the outstanding share count. However, earnings missed Wall Street’s expectation, reflecting currency volatility and higher commodity, manufacturing, and logistics costs.
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Including yesterday’s decline, Clorox stock is now down 3.9% on a YTD basis and underperformed the S&P 500 Index as well as its peers. The S&P 500 Index registered gains of 16.6% during the same period.
We expect persisting sales and margin headwinds to limit the recovery in Clorox stock. A heightened promotional environment, distribution losses, and currency volatility are likely to hurt its top-line growth rate. Meanwhile, higher manufacturing and logistics costs and inflation in commodities are expected to take a toll on its margins.
Weak sales and margins are expected to hurt Clorox’s bottom line. However, higher net price realization and cost savings could continue to support sales and earnings.