Clorox Faces Challenges from Cyberattack; Analyst Predicts Slow Recovery Until FY25

Raymond James analyst Olivia Tong downgraded Clorox Co CLX to Market Perform from Outperform and maintained a price target of $185.00.

The bearish stance is due to the weaker-than-expected Q1 preliminary results announcement. The company sees Q1 adjusted EPS of $(0.40)-$0.00 and a net sales decline of 23%-28% Y/Y, with expected organic sales decrease of 26%-21% (vs. guidance of mid-single-digits growth).

The company's weak expectations are due to the recent cybersecurity attack on August 14.

The analyst doesn't see a recovery in the near term but considers the impact of the attack largely subsiding for the company by FY25. Tong sees the company returning to the recovery lane by H2 FY24.

Related: Clorox Shares Could Rally As Operations Revive After Cyberattack, Says Bullish Analyst

The analyst anticipates incremental margin headwinds until the ramp-up of manufacturing and operations to full capacity and expects increased promotion levels as CLX works towards attaining lost shares. 

The analyst sees estimates for EPS loss at $(0.25) vs. EPS of $1.42 in Q1 and EPS of $0.75 (from $1.12) for Q2 FY24. Tong projects the negative effects of cyberattack to remain in Q2, but pipeline rebuilding to accelerate in H2 FY24. 

Also, the analyst lowered estimates for adjusted EPS to $4.15 (from $5.72) for FY24 and $6.08 (from $6.73) for FY25.

Price Action: CLX shares are trading lower by 5.84% at $124.13 on the last check Thursday.