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A Few Key Takeaways From Clorox's Analyst Presentation

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A Few Key Takeaways From Clorox's Analyst Presentation
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Clorox Co (NYSE: CLX) earlier this week hosted a sell-side presentation. Here is a summary of how three analysts reacted to the event.

The Analysts

  • Wells Fargo's Bonnie Herzog maintains a Market Perform rating on Clorox with a price target lifted from $145 to $160.
  • Raymond James' Joseph Altobello maintains at Market Perform, no assigned price target.
  • Bernstein's Ali Dibadj.

Shares traded around $163.68 at time of publication.

Wells Fargo: 4 Takeaways

Clorox's presentation had four key takeaways, Herzog said in a note.

  • Pricing is "sticking" and the company isn't looking to promote it back.
  • Gross margin is expected to inflect positively in the back half of fiscal 2018 and any upside flow-through could be pushed to the bottom-line.
  • Management is "excited" about new products in the back half of 2019.
  • Kingsford natural charcoal and wood pellets is a "clear focus area" due to recent consumption and sales weakness.

Raymond James: Bullish On Economy, Long-Term Outlook

Clorox management expressed an "upbeat" tone regarding the broader macro economic environment, including low unemployment and higher consumer confidence, Altobello said. Encouragingly, the company also boasts a strong track record during economic slowdown periods.

Despite seeing clear margin pressures in 2018, Altobello said management continues to believe its target of expanding EBIT margins by 25 to 50 basis points annually is still possible. Management also said it will remain disciplined in buying back its own stock after a rally from under $120 in April to north of $165 today. Management also gave the impression it would "effectively act as a floor on pullbacks."

After overseeing the acquisition of Nutranext in early 2018, management said it will continue looking at new M&A opportunities but its focus remains "targeted and financially disciplined with respect to valuation."

Bernstein: No Change In Tone

Heading into Clorox's presentation, management was expected to temper expectations but management "sounded as confident as ever," Dibadj said.

The analyst's first-hand checks revealed "some worrying signs" in terms of widening price gaps but management's presentation showed no indication this is happening. Also, strong innovation flow with an emphasis in trash bags and charcoal is likely to be seen, which will translate to an ad spend increase but within the targeted 10 percent of sales range.

Related Links:

Fresh And Clean: Argus Upgrades Clorox On Innovative Growth

Once More Unto The Bleach: Goldman Sachs Downgrades Clorox

Photo credit: Mike Mozart, Flickr

Latest Ratings for CLX

DateFirmActionFromTo
Dec 2018Wells FargoMaintainsMarket PerformMarket Perform
Nov 2018CitigroupMaintainsNeutralNeutral
Nov 2018CitigroupMaintainsNeutralNeutral

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Posted-In: Ali Dibadj Bernstein Bonnie Herzog Cleaning Consumer GoodsAnalyst Color Price Target Analyst Ratings Best of Benzinga

 

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