Consumer product and cleaning provider Clorox (NYSE:CLX) posted second quarter results on Feb. 3, 2012, and profits that came in well ahead of analyst projections. It also boosted it sales guidance, but despite the positive near-term trends, still lags a number of larger rivals, in terms of investment appeal. Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Second Quarter Recap
Net sales advanced a modest 3.6% to $1.2 billion. Sales advanced in three of four operating segments, with international sales lagging by reporting flat sales of $287 million (23.5% of total sales). The lifestyle segment (Hidden Valley salad dressing and Brita water filters) was the standout, posting a 6% growth to account for nearly 19% of sales. The cleaning unit (Clorox-branded laundry, home care) wasn't far behind, posting a 5% growth to remain the largest contributor to total sales at 30.3%. Household (Glad trash bags, Kingsford Charcoal, Scoop Away cat litter) grew 4% to just over 27% of sales.

Advertisement - Article continues below.

International sales again lagged in terms of profit growth, posting a 22% decline in pre-tax earnings. Cleaning and household sales posted impressive gains of 22 and 36%, respectively. Lifestyle sales returned to positive profits after a hefty charge in last year's second quarter to write down the value of lip balm and personal care product provider Burt's Bees because it overpaid in 2007, just as the global economy was entering a severe recession. Total operating profit came in at $155 million while net income reached $105 million, or 79 cents per diluted share. Backing out the charges, Clorox estimated that earnings grew 3.8% to 82 cents per diluted share. (To know more about income statements, read Understanding The Income Statement.)

Outlook
For the full year, Clorox projects modest total sales growth between 2 and 4%. Analysts are currently modeling a 2.3% growth and total sales of almost $5.4 billion. Clorox expects to report diluted earnings per share in a range of $4.03 and $4.11 for annual growth as high as 4.6%, if it hits the high end of that range.

The Bottom Line
Back in September, corporate raider Carl Icahn formally gave up his pursuit of either acquiring Clorox outright or having a larger rival, such as Procter & Gamble (NYSE:PG), Unilever (NYSE:UN) (NYSE:UL) or Kimberly-Clark (NYSE:KMB), make a bid for the entire company. Icahn's bid was for an estimated $12.6 billion, but was taken as more of an attempt to create a bidding war for the firm.


Shares of Clorox have held up well since Icahn gave up, though the market capitalization is now below $10 billion. However, the valuation, as judged by a forward earnings multiple, continues to look lofty at 16. Earnings growth has also been quite mixed over the past three years, and free cash flow has declined rather steadily since fiscal 2009.

At the current price level of roughly $70 per share, the above larger rivals look to offer a better combination of growth potential at a more reasonable valuation between 13 and 15 times. All also offer appealing current dividend yields between 3 and 4%, which are well ahead of the current market average of closer to 2%. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.