Will Clorox (CLX) Miss Earnings? - Analyst Blog

The Clorox Company CLX is scheduled to report its third-quarter fiscal 2014 results on May 1. Last quarter, this consumer products company posted a negative earnings surprise of approximately 3.30%. Let's see how things are shaping up for this announcement.

Factors in the Past Quarter

Clorox posted lower-than-anticipated earnings results for second-quarter fiscal 2014 as the negative impact from adverse foreign currency exchange rates and higher manufacturing and logistics costs as well as commodity costs more than offset the increased pricing, higher volume and effective cost management. On the other hand, net sales improved backed by the increased pricing and higher volumes that were partially offset by currency translations as well as unfavorable product mix.

Additionally, the company lowered its sales and earnings forecasts for fiscal 2014 anticipating pressures from unfavorable foreign currency exchange rates and increased commodity costs. The company expects sales to grow in the range of 1%–2%, instead of 2%–3% projected earlier. Further, earnings per share are now expected to be $4.40–$4.55, down from the earlier forecast of $4.45–$4.60.

Earnings Whispers?

Our proven model does not conclusively project Clorox as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
 
Zacks ESP: ESP for Clorox is 0.00% since the Most Accurate estimate stands at $1.08 per share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #4 (Sell): Clorox's Zacks Rank #4 when combined with 0.00% ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements:

The Walt Disney Company's DIS Earnings ESP stands at +1.03% and it carries a Zacks Rank #2 (Buy).

Church & Dwight Co. Inc. CHD has an Earnings ESP of +1.37% and a Zacks Rank #3 (Hold).

The Allstate Corporation ALL with an Earnings ESP of +0.88% holds a Zacks Rank #3 (Hold).