Clorox (CLX) Readies For Q4 Earnings: What's In The Cards?

The Clorox Company CLX is likely to register top-line growth when it reports fourth-quarter fiscal 2022 earnings on Aug 3. The Zacks Consensus Estimate for quarterly revenues is pegged at $1,856 million, suggesting a rise of around 3% from the prior-year quarter's reported figure.

The Zacks Consensus Estimate for quarterly earnings has dropped by a couple of cents in the past seven days to 95 cents per share, in line with the figure reported in the prior-year quarter. This consumer and professional products company has a trailing four-quarter earnings surprise of 3.3%, on average. CLX delivered an earnings surprise of 35.1% in the last reported quarter.

Factors to Note

Clorox has been on track with the IGNITE strategy. The IGNITE strategy mainly binds Clorox in four strategic areas, namely fuel growth through brand reinvestments, innovate to deliver enhanced customer experience, develop the product portfolio and re-imagine the company's operations. IGNITE's main principle, ‘Innovating for Good Growth', is delivering growth. Clorox also remains on track with its cost-saving and productivity initiatives. Apart from this, the company has been witnessing strong progress in the core International business as it continues to build on the success of the segment's Go Lean strategy.

Clorox remains focused on making long-term brand investments to support its innovation pipeline and customer engagement efforts. However, this has resulted in higher selling and administrative expenses for the past few quarters. It has also been incurring incremental spending on advertising and sales promotion to support sales growth. On its last earnings call, CLX stated that it expects operating costs to remain high in fiscal 2022. The company now projects selling and administrative expenses, as a percentage of sales, to be 14-15% for fiscal 2022. This raises concerns for the quarter under review.

On its last earnings call, Clorox also updated its fiscal 2022 view to take into account the adverse impacts of cost inflation and the volatile operating environment. The company's guidance also includes the uncertainty regarding the impacts of the war in Ukraine. The gross margin for fiscal 2022 is now expected to decline 800 basis points (bps) compared with a 750-bps decline mentioned earlier. The revised gross margin guidance stems from higher-than-anticipated commodity costs and manufacturing and logistics expenses. Consequently, adjusted earnings for fiscal 2022 are estimated in the band of $4.05-$4.30 per share, down from the $4.25-$4.50 per share range mentioned earlier. These factors are also likely to have affected performance in the to-be-reported quarter.

However, the company's innovation pipeline, cost-saving efforts and inflation-driven pricing actions bode well.

What the Zacks Model Unveils

Our proven model doesn't conclusively predict an earnings beat for Clorox this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Clorox carries a Zacks Rank #3 and has an Earnings ESP of -1.05%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Corteva CTVA currently has an Earnings ESP of +0.20% and a Zacks Rank of 1. The company is likely to register an increase in the bottom line when it reports second-quarter 2022 results. The Zacks Consensus Estimate for quarterly earnings has risen by a penny over the past seven days to $1.47 per share in the past 30 days. The consensus mark for CTVA's earnings suggests 5% growth from the year-ago quarter's reported number.
Corteva's top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $6.2 billion, which suggests a rise of 9.8% from the figure reported in the prior-year quarter. CTVA delivered an earnings beat of 22.3%, on average, in the trailing four quarters.

Kellogg K currently has an Earnings ESP of +2.01% and a Zacks Rank of 3. The company is likely to register an increase in the top line when it reports second-quarter 2022 results. The Zacks Consensus Estimate for quarterly revenues is pegged at $3.7 billion, which suggests a rise of 2.6% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for K's quarterly earnings has remained unchanged in the past 30 days at $1.05 per share. The consensus mark indicates a 7.9% decline from the year-ago quarter's reported number. Kellogg delivered an earnings beat of 12.8%, on average, in the trailing four quarters.

Ollie's Bargain Outlet OLLI currently has an Earnings ESP of +6.06% and a Zacks Rank of 3. The company is likely to register a rise in the top line when it reports second-quarter fiscal 2022 results. The Zacks Consensus Estimate for OLLI's quarterly revenues is pegged at $457.5 million, which suggests a jump of 10% from the figure reported in the prior-year quarter.

The consensus mark for Ollie's Bargain's quarterly earnings has remained unchanged at 33 cents per share in the past 30 days. The consensus estimate for OLLI's quarterly earnings suggests a decline of 36.5% from the year-ago quarter's reported figure. Ollie's Bargain delivered a negative earnings surprise of 17.1%, on average, in the trailing four quarters.
 
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