What's In Store For Clorox This Earnings Season? Analyst Sees Issues With Trash Bags, Cat Litter & More

RBC Capital Markets analyst Nik Modi reiterated the Sector Perform rating on Clorox Company CLX, with a price target of $138.

The company will issue its second-quarter fiscal year 2024 results on Feb. 1, 2024. 

Given that the stock has rallied nearly 20% since late October, the analyst is cautious about the company going into the print.

While the analyst’s channel checks indicate more bad than good, some of the risk is mitigated, as this quarter’s results should be supported by inventory rebuild of shipments. 

Per the analyst, focus will be on the company’s commentary regarding the second half of the year given the wide guidance ranges. 

Per Modi, the topline range is achievable but it is positioned toward the bottom end of the EPS range (given the expectation that the company will have to spend more than the consensus is modeling on advertising and promotions).

The analyst flags that CLX is having issues with trash bags, cat litter, Hidden Valley Ranch (not great, given the upcoming Super Bowl), and Wipes. On the other hand, charcoal is said to be performing well, the analyst said.

On the topline, while the analyst expects the pricing to continue to moderate (but not be negative), volumes would need to be in the -HSD% range in the second half to reach the low end of guidance (which is unlikely given the relatively easy volumes comps and initial January Circana trends).

Overall, the 2023 cyber-attack really set the company back and recovery will take longer than the buyside currently expects, the analyst notes.

The company is still seeing shelf space challenges in categories such as waste bags, cat litter, wipes, and salad dressing. 

In addition, the macro environment remains sluggish, which could put pressure on some of Clorox’s categories with a high degree of private label exposures, Modi notes.

Price Action: CLX shares are trading higher by 0.79% to $145.85 on the last check Tuesday.