Here's How You Should Play Clorox Stock After a 12% Drop in 6 Months

Core Viewpoint - The Clorox Company (CLX) is experiencing significant challenges, with a stock price decline of 12.1% over the past six months, underperforming compared to the industry and broader consumer staples sector [1][5]. Stock Performance - CLX's stock closed at $139.82, remaining below its 200-day and 50-day simple moving averages (SMAs) of$152.40 and 143.99, respectively, indicating a potential sustained downward trend [3][4]. - Compared to competitors, CLX's performance is weaker, with Colgate-Palmolive and Procter & Gamble experiencing declines of 9.1% and 4.7%, respectively, while Church & Dwight saw a growth of 1.3% [5]. Financial Performance - In Q2 of fiscal 2025, Clorox's revenues and earnings exceeded the Zacks Consensus Estimate, but revenues still declined by 15% year-over-year due to broad-based declines across key business segments [9]. - Revenue declines were reported in Health and Wellness (13%), Household (11%), Lifestyle (16%), and International (12%) segments, primarily due to volume contraction [9]. Future Outlook - Management has provided a cautious outlook for fiscal 2025, projecting net sales growth between -1% and 2%, with gross margin growth expected to be offset by cost inflation and increased trade promotional expenses [10]. - Clorox plans to invest 11-11.5% of net sales in advertising and sales promotion, with selling and administrative expenses forecasted at 15-16% of net sales [10]. Earnings Estimates - The Zacks Consensus Estimate for Clorox's earnings per share (EPS) for fiscal 2025 is stable at 7.15, while the estimate for fiscal 2026 has decreased by 0.6% to $7.08 [11]. Strategic Initiatives - Clorox is implementing its IGNITE strategy to accelerate profitable growth and enhance long-term success, focusing on expanding key business elements and driving innovation [13]. - The company has streamlined its operating model to improve efficiency and profitability, resulting in meaningful improvements in gross margin [14]. - Clorox is investing$560-$580 million in transformative technologies over the next few years, with 70% of these costs tied to ERP implementation [16]. Valuation - Clorox is currently trading at a forward 12-month P/E ratio of 19.71, below the industry average of 20.2 and the S&P 500's average of 20.05 [19]. - The lower valuation may suggest an attractive entry point but could also reflect investor concerns regarding potential underlying challenges within the business [20].