Clorox EPS Meets, Affirms Guidance - Analyst Blog

The Clorox Co. (CLX) posted marginal 0.6% growth in fiscal 2010 fourth-quarter earnings to $171 million from $170 million in the year-ago period. Earnings per share came in at $1.20, matching the Zacks Consensus Estimate, but lagged the year-ago earnings of $1.25 per share.

Clorox’s net sales during the quarter grew 1.1% year-over-year to $1.52 billion, beating the Zacks Consensus Estimate $1.51 billion. The growth was primarily driven by increased volume and higher pricing in International markets, partially offset by the unfavorable impact of Venezuelan currency devaluation. Total volume in the quarter edged up 2% on the back of strong shipments of Kingsford charcoal and Hidden Valley bottled salad dressing.

Segment-wise

Clorox’s sales in the Cleaning segment dipped 1%, while volumes rose 1%. The decline in segment sales was mainly caused by unfavorable product mix. Volume increase was driven by higher shipments of Armor All auto care products and Pine-Sol cleaner, partially offset by reduced shipments of disinfecting products.

Household segment sales remained flat amid a 1% increase in volumes. Volume growth in the segment was primarily attributable to higher volumes of charcoal and trash bags, partially offset by reduced shipments of Clorox’s food-storage products.

Clorox’s Lifestyle segment recorded 7% sales growth on the back of a 10% growth in volumes. The volume growth was mainly driven by Hidden Valley bottled salad dressing and Burt's Bees products, partially offset by lower volumes of Brita water-filtration products.

In the International segment, Clorox’s sales grew 2% on flat year-over-year volumes. The top-line primarily benefitted from price increases. Volumes during the quarter witnessed higher shipments of cleaning products in southern Latin America, entirely offset by reduced shipments of home care products in Venezuela and Mexico and distribution losses in Australia.

Margins

Clorox’s gross margin reduced 100 basis points (bps) to 44.8% from 45.8% in the year-ago quarter due to increased commodity costs and trade-promotion related expenses. Operating margin also dipped 90 bps to 20.2% from 21.1% in the year-ago period.

Balance Sheet and Cash Flow

At quarter end, Clorox had cash and equivalents of $87 million and long-term debt of $2.4 billion, compared to a cash balance of $206 million and a long-term debt of $2.7 billion in the year-ago quarter. During the quarter, the company generated $376 million of cash from operations, compared to $315 million in the year earlier period. The company also deployed $150 million of cash to buy back 2.4 million shares in the reported quarter.

Guidance and Zacks Consensus

Looking ahead, Clorox reiterated its guidance for fiscal 2011. The company anticipates annual earnings of $4.50 to $4.65 per share on 2% to 4% growth in sales. The guidance is in-line with the Zacks Consensus Estimate of $4.59 per share, which edged up a penny over the past month as 3 of 18 covering analysts raised expectations.
 
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