Clorox Pre-Q3 Earnings Send Mixed Signals: Time to Accumulate Shares?

The Clorox Company CLX is likely to register a decline in the top and bottom lines when it reports third-quarter fiscal 2025 results on May 5, after market close.

The Zacks Consensus Estimate for revenues is pegged at $1.71 billion, indicating a decrease of 5.5% from the prior-year quarter. The consensus mark for quarterly earnings has declined 1.3% in the past 30 days to $1.57 per share, indicating a decrease of 8.2% from the figure reported in the year-ago quarter. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

CLX has a trailing four-quarter earnings surprise of 23.8%, on average, including an 11.5% surprise in the most recent quarter.

The Clorox Company Price and EPS Surprise

The Clorox Company price-eps-surprise | The Clorox Company Quote

Things to Consider About CLX’s Upcoming Results

Clorox looks well-positioned for the upcoming release, thanks to its robust growth strategies, innovations, digital transformation and pricing and cost-saving initiatives. The company has been benefiting from its IGNITE strategy, which mainly focuses on the expansion of the key elements under the 2020 Strategy to pace up innovation across each area of business.

Clorox is experiencing strong progress in the core International business as it continues to build on the success of the segment's Go Lean strategy. These efforts will help in accelerating profitable growth for the segment. Driven by its IGNITE strategy, which aims to improve profitability in the International business, the company expects to invest selectively in profitable platforms. Management continues to explore international opportunities in the upcoming quarter. Our model predicts organic sales for the International segment to increase 9% year over year in third-quarter fiscal 2025.

Clorox has been actively streamlining its operating model to enhance efficiency and drive productivity, a strategy that is likely to have contributed positively to its recent performance. The streamlined approach has improved the company's agility in adapting to changing consumer behaviors, accelerating innovation and generating increased cash flow. This has been achieved through cost savings across key areas. These aspects are expected to have aided its performance in the to-be-reported quarter.

Our model predicts adjusted operating profit to increase 8.3% year over year to $281.7 million. The operating margin is expected to expand 180 basis points (bps) to 16.1%.

However, Clorox continues to operate in a challenging macroeconomic environment where consumers face ongoing financial pressures. The company has been contending with increased advertising expenses essential for maintaining brand visibility, which have weighed on its profitability. Clorox faces stiff competition in the consumer goods sector, which further pressures its market share and operational performance. These factors are expected to have slightly marred its performance in the to-be-reported quarter.

What the Zacks Model Unveils for CLX

Our proven model does not conclusively predict an earnings beat for Clorox this time around. 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. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Clorox currently has an Earnings ESP of -2.69% and a Zacks Rank of 3.

CLX’s Price Performance & Valuation

From a valuation perspective, CLX stock is trading at a discount relative to the industry. CLX has a forward 12-month price-to-earnings ratio of 19.45x, below the Consumer Products - Staples industry’s average of 21.08x.

CLX has lost 14.8% in the year-to-date period, underperforming its industry’s decline of 1.2% in the same period. Furthermore, Clorox’s performance has lagged the broader Consumer Staples sector’s 1.8% growth and the S&P 500's 2.4% decrease in the same period.

CLX Stock's Past Six-Month Performance

Stocks With the Favorable Combination

Here are some companies, which according to our model, have the right combination of elements to beat on earnings this reporting cycle.

Grocery Outlet GO currently has an Earnings ESP of +12.50% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2025 earnings per share (EPS) is pegged at seven cents, which implies a roughly 22.2% decline year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Grocery Outlet’s quarterly revenues is pegged at $1.13 billion, which indicates growth of 8.8% from the figure reported in the prior-year quarter. GO has a trailing four-quarter negative earnings surprise of roughly 8.3%, on average.

Celsius CELH currently has an Earnings ESP of +2.91% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2025 EPS is pegged at 20 cents, which implies a 25.9% increase year over year.

The consensus estimate for Celsius’ quarterly revenues is pegged at $341.7 million, which indicates a decline of 4% from the figure reported in the prior-year quarter. CELH has a trailing four-quarter negative earnings surprise of roughly 4%, on average.

Molson Coors TAP currently has an Earnings ESP of +4.01% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2025 EPS is pegged at 80 cents, which implies a roughly 15.8% decline year over year.

The consensus estimate for Molson Coors’ quarterly revenues is pegged at $2.4 billion, which indicates a decline of 6% from the figure reported in the prior-year quarter. TAP has a trailing negative four-quarter earnings surprise of 18.1%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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