Fresh And Clean: Argus Upgrades Clorox On Innovative Growth

Based on cost efficient operations, strong market share and revenue boosting efforts, one analyst upgraded Clorox Co. CLX.

The Analyst

Argus analyst John Staszak upgraded Clorox from Hold to Buy and set a price target of $175.

The Thesis

Clorox has produced positive earnings per share in recent quarters, with furthered growth expected.

“The balance sheet is clean. Clorox pays a dividend with a yield of about 2.6%, and is part of the S&P 'Dividend Aristocrats' group - companies that have increased their dividends every year for at least 25 years,” Staszak said in a note. “The company has raised its payout at an 11% compound annual rate over the past six years.”

Recent data reflects the company’s strong growth profile and consistency of outperformance, two indicators that drive the premium, Staszak said.

Higher earnings demonstrated lower advertising costs from the Nutranext acquisition, while organic revenue grew 2 percent by volume growth and revised pricing. Gross margin fell roughly 170 basis points, driven by higher material and transportation costs, while reported operating margin rose 110 basis points. The cleaning segment, which includes laundry and home care, increased 3 percent year-over-year.

According to Staszak, revenue should increase over 3 percent in 2019, to $6.36 billion, with the help of economic growth and new product lines. “We believe that Clorox's stable and diverse business operations and consistent dividend warrant a higher multiple.”

Price Action

Clorox shares have increased 5 percent since the company’s strong earnings in August. Shares traded around $149.78 at time of publication Tuesday afternoon.

Related Links:

With Obstacles To Growth In Sight, Argus Downgrades Clorox

Once More Unto The Bleach: Goldman Sachs Downgrades Clorox

Photo credit: Mike Mozart, Flickr