The S&P 500 Is Dropping Like a Rock but Clorox Stock Is Rising -- Here's Why

Core Viewpoint - Clorox Company reported strong profits in its fiscal fourth quarter of 2024, but its stock price increase may not be justified given the decline in sales and lack of expected top-line growth [1][2][4]. Financial Performance - In the fourth quarter, Clorox experienced a 6% year-over-year decline in net sales, with organic sales down 3% after accounting for the divestment of its Argentine business [2]. - The company achieved a gross margin of 43% in fiscal 2024, up from approximately 39% in fiscal 2023, indicating significant improvement [3]. - Management projects a gross margin of about 44% for fiscal 2025, with expected earnings per share (EPS) ranging from $4.95 to $5.20, reflecting solid year-over-year growth [3]. Stock Valuation - Following the recent price increase, Clorox trades at 27 times its forward earnings estimates, which is higher than the average S&P 500 stock [4]. - Management does not anticipate top-line growth in the upcoming year, suggesting that the stock should be valued below average rather than at a premium [4]. Market Demand - Despite the financial results and outlook, Clorox's products maintain consistent demand, which may provide some stability regardless of economic conditions [5].