It likely won't come as a surprise to most that, in the middle of a pandemic of varying intensity for the last year now, cleaning and disinfecting take on a whole new life and importance. Such an attitude has driven Clorox (NYSE:CLX) to some fantastic new numbers, and it doesn't look like there's much ahead to slow the company down going into 2021, either.
The Numbers Make a Clean Sweep
The numbers were an absolute winner for Clorox, which turned in quarterly earnings of $2.03 per share. That's well above the estimates of $1.78 for the period, and reports also note that revenue turned out to be sound too. Net sales were at $1.84 billion, which compares well against the estimates of $1.75 that emerged from Refinitiv, and especially well to the $1.45 billion in sales seen at the same time the preceding year.
Clorox has been running its factories full-tilt since the early days of the pandemic, frantically producing to attempt to keep up with demand. It's even taken some drastic steps, reports note, like looking to third-party suppliers to absorb some of its excess demand and even transporting products by air, which is much faster but also more costly.
The result has yielded gains all over, and Clorox now projects organic sales for the 2021 fiscal year to increase between 10% and 13%, as opposed to the earlier projections of between 5% and 9%. Full year earnings per share are also on track to increase; earlier projections put the range between $7.70 and $7.95 per share, but now, that's up to between $8.05 and $8.25.
A Flash in the Pan?
The broader analyst pool, based on our latest research, is somewhat skeptical, though less so than it was. The company is currently carrying a consensus rating of “hold”, which has been the case for the last six months.
Six months ago, the company had three “sell” ratings, seven “hold” and three “buy” ratings. Three months ago, that trended even farther toward bearishness with three “sell”, six “hold” and two “buy.” Then, a month ago, the rating swung back toward bullish in a huge way with three “sell”, six “hold” and five “buy” ratings. Today, we're only slightly less bullish with three “sell”, eight “hold” and five “buy” ratings.
The price target has actually slipped a bit after months of gain. Six months ago, the price target was at $199.38. That increased three months ago to $212.42. That saw one more increase last month to $218.50 before slipping a bit today to $217.81. The price targets have represented nothing but upside since a slight downside risk six months ago, which suggests there's room for further improvement. With Clorox trading at $194.87 as of this writing, we could indeed see some recovery later.
Scrubbing Down the Future Figures
By all reports, Clorox is having a great run of things. Revenue is up, earnings are up, the near-term future actually looks pretty great, so why is Clorox down almost 5% as of this writing? One of the leading potential causes seems to be profit taking; the company was up in a big way last month, going from $197.21 back on January 21 to reach $222.18 less than a week later. The prices we're seeing right now are in line with what we were seeing throughout most of November, and with good reason. With the pandemic looking a lot less like a pandemic than it did, say, back in March or even May, the demand for cleaning supplies might start to slip going forward. Sure, there will still be plenty of call for such things, but perhaps without the frantic nature we saw back then. Treatment options are on the rise, both vaccine and therapeutic, which could prompt a lot less panic-cleaning.
That's not all the impact Clorox has; recently, the company announced that it's now completely powered by renewable electricity in both the US and Canada. While that doesn't exactly have an impact on how much bleach it's selling, it will improve the company's image with the environmentally conscious, and that could help drive some sales if properly promoted. It also might help cut some costs as well, depending on how it's done; most renewable resources have a payback period connected with them that allows them to be profit engines later on.
With a clean house being an excellent protection against all manner of illness—especially for small children—Clorox's supply of product is likely to be in brisk demand for some time to come. While it may not be in the demand it was back during the full-blown-pandemic days—you may actually be able to find it on shelves—it's likely to still be desirable property, and that means good news for investors.
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