CL Colgate Palmolive Co

Clorox Corporation (CLX) recently announced its financial results for the third-quarter of fiscal 2011. 

Street analysts had more than a week to ponder on the news. In the subsequent paragraphs, we will cover the recent earnings announcement, analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation on the stock.

Third Quarter Highlights

Clorox Corporation posted lower third-quarter fiscal 2011 earnings of $1.03 per share compared with $1.07 per share in the year-ago quarter. Reported quarter earnings also failed to meet the Zacks Consensus Estimate of $1.04 per share.

Clorox’s net sales during the quarter upped 1.3% year over year to $1,304 million from $1,287 million in the year-ago quarter. However, total revenue fell short of the Zacks Consensus Estimate of $1,321 million.

Total volume in the quarter inched up 1% as the company benefited from volume gains from Burt's Bees natural personal care products, the Away From Home institutional business and Home Care category. However, this was partially offset by decline in volume in the Glad and Brita businesses.

We have discussed the quarterly results at length here: Clorox Disappoints

Agreement of Analysts

Estimates for Clorox are clearly on the downtrend following the third-quarter results, which reflecteda negative sentiment among analysts. Out of 19 analysts, 11 have decreased their forecasts for the fourth quarter of fiscal 2011 over the past week with just 1 analyst increasing its estimate.

Similarly, 6 out of 18 analysts have lowered their estimates for fiscal 2011 over the last 7 days with none moving in the opposite direction. The downward revision trend by analysts is reflective of the disappointing third-quarter results.

Magnitude of Estimate Revisions

Given the strong directional pressure from the negative revisions, estimates for the fourth quarter of fiscal 2011 and full-year 2011 have gone down by 4 cents and 3 cents, respectively, over the last 7 days. The current Zacks Consensus Estimate for the fourth of fiscal 2011 is $1.20 and for fiscal 2011 is $3.89.   

Our Recommendation

Cloroxis one of the world's leading manufacturers of consumer products. Furthermore, the company possesses a strong portfolio of brands, including Clorox, Glad, Brita, Armor All, Burt’s Bees, STP and Kingsford, whichoffer a competitive edge to the company and bolsters its well-established position in the market.

Clorox has established financial goals to measure its progress. These goals include 3% to 5% annual sales growth before acquisitions, and 75 to 100 basis points of annual improvement in operating margin. Additionally, the company has plans to carefully manage the growth of its asset base. If these financial objectives are achieved, management expects to realize double-digit economic profit growth and free cash flow in the range of 10% to 12% of net sales.

However, Cloroxfaces intense competition from other well-established consumer product companies, both in the U.S. and in international markets. Most of the company’s products compete with other widely-advertised brands within each product category and “private label” brands and “generic” non-branded products of grocery chains and wholesale cooperatives in certain categories, which typically are sold at lower prices.

Clorox Corporation, which competes with names like Colgate-Palmolive Company (CL) and Procter and Gamble Company (PG), currently holds aZacks #4 Rank, which translates into a short-term Sell rating. Our long-term recommendation is currently Neutral.

 
COLGATE PALMOLI (CL): Free Stock Analysis Report
 
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