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Tickers in this Article: CLX, UN, UL, KMB, PTV
Cleaning and consumer products firm Clorox (NYSE:CLX) reported second quarter results on Thursday. The results illustrated why it has an advantage over the competition. The companies strong sales and expense management are combining to boost profit growth that should continue for the foreseeable future.

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Second Quarter Highlights
Sales improved 5% to $1.3 billion as a 5% increase in volume offset promotional activity to fend off pricing action at competitors. Clorox attributed the volume increase primarily to, "higher shipments of disinfecting products, Brita® water-filtration products and several other major brands." Currency fluctuations also accounted for 1.7% of the higher sales. (To learn more about the most important figures in the stock market, read Everything Investors Need To Know About Earnings.)

By primary operating segment, cleaning, accounting for 33.2% of total sales, experienced 3% sales growth on 8% volume growth. Particular strength was cited in disinfecting products, the Clorox toilet and bathroom cleaners, and Armor All automotive cleaner. The household unit, accounting for 26.1% of total sales, reported a 6% fall in sales on flat volumes and price declines - primarily from Glad trash bags due to lower resin costs. This also impacted rival Pactiv (NYSE:PTV), which reported a 12% fall in pricing within its Hefty division.

Clorox's lifestyle unit accounts for 16.6% of total sales, and includes products ranging from, "dressings and sauces, water filtration, [and] global natural personal care." This unit witnessed strong double-digit sales and volume growth on higher sales of Brita water filters and Burt's Bees skincare items. Finally, Clorox broke out international sales accounting for 24.1% of total sales, producing 21% sales growth in all markets outside of the U.S.

Pre-tax earnings improved in every segment save for household (flat profits), with lifestyle and international boasting double-digit increases and cleaning a healthy 9% boost. For Clorox overall, gross profit improved 12.6% to $1.2 billion for the July-January year over year period. Expense controls and lower interest expense sent operating earnings (EBIT) ahead 28.4% to $407 million. Higher income taxes tempered net income growth to a still-healthy 24.8% boost to $267 million, or $1.88 per diluted share.

The Bottom Line
For the full year, Clorox expects sales growth of 1% to 2% and diluted earnings growth of 8% to 12%, or $4.10 to $4.25 per share. This was higher than previous guidance and places the forward P/E at approximately 14.6 times, which is at the very low end of its five-year range of 14.1 to 25.3 times. This is in line with rivals including Unilever (NYSE:UN,UL) and Kimberly Clark (NYSE:KMB). However, both of Clorox's competitors are currently relying on cost cuts to boost profits, which can take a company only so far. (For further reading, check out Earnings Forecasts: A Primer.)

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