Clorox Pre-Q4 Earnings Send Mixed Signals: Time to Accumulate Shares?

Core Insights - Clorox Company (CLX) is expected to report fiscal fourth-quarter 2025 earnings on July 31, with anticipated year-over-year growth in both revenue and earnings [1][8] - The Zacks Consensus Estimate for fourth-quarter revenues is $1.94 billion, reflecting a 2% increase from the prior year, while the earnings per share (EPS) estimate is $2.25, indicating a 23.6% increase year-over-year [2][8] - For fiscal 2025, the revenue estimate is $7.1 billion, a slight decline of 0.5% from the previous year, with EPS expected to rise by 14.9% to $7.09 [3][8] Financial Performance - Clorox has achieved its 10th consecutive quarter of gross margin growth, with a projected gross margin of around 44% for Q4, despite facing tariff-related costs and ERP transition expenses [5][6] - The adjusted operating profit for Q4 is predicted to increase by 27% year-over-year to $391.2 million, with an expected operating margin expansion of 400 basis points to 20.2% [6][8] Strategic Initiatives - The company is executing its IGNITE strategy, focusing on innovation and brand equity, which has led to successful premium product launches like Scentiva [4][8] - Clorox's operational efficiency and margin expansion strategies have helped mitigate cost pressures, allowing the company to maintain stability amid external challenges [5][8] Market Position - Clorox's international segment shows growth potential, with strong household penetration and premium positioning insulating the brand from significant trade-down behavior [7][8] - Despite a challenging macroeconomic environment, Clorox's brand portfolio and execution capabilities enable it to navigate market challenges more effectively than many competitors [7][8] Valuation and Stock Performance - Clorox stock is trading at a forward 12-month price-to-earnings ratio of 19.50x, below the industry average of 20.20x, indicating a potential valuation opportunity [11][8] - Year-to-date, Clorox has underperformed, with a decline of 21.6%, compared to a 2.4% decline in its industry and a 5.4% growth in the broader Consumer Staples sector [14][8]