(CLX) The Clorox Company Beats Expectations – Raises Guidance

February 4th, 2010

The Clorox Co. (CLX) recorded 28% growth in fiscal second-quarter earnings to $110 million from $86 million in the year-ago quarter. Earnings per share came in at 77 cents, which topped the Zacks Consensus Estimate by 2 cents.

Net sales for the quarter rose by 5.2% to $1.3 billion from $1.2 billion in the year-ago period. The growth was primarily driven by strong demand for Clorox’s disinfecting products and favorable foreign currency translations. Total volume increased 5%, primarily due to higher shipments of disinfecting and water filtration products.

Segment-wise

In the Cleaning segment, sales increased 3% and volumes grew 8%. The volume increase was driven by increased shipments of disinfecting products to meet demand related to the H1N1 flu pandemic.

In addition Incorporatedreased shipments of toilet and bathroom cleaners as well as auto-care products also contributed positively to the top-line. These were partially offset by unfavorable product mix and higher trade-promotion spending in response to competitive activity.

In the Household segment, sales declined 6% accompanied by flat volumes. The segment witnessed increased shipments of cat litter and trash bags, which was fully offset by lower shipments of food storage products. In addition, Clorox also witnessed price declines in trash bags in-line with resin costs.

The Lifestyle segment recorded 10% sales growth and 12% volume growth. The volume growth was mainly driven by Brita water-filtration, Hidden Valley bottled salad dressing and Burt’s Bees products.

In the International segment, sales expanded 21% and volumes grew by 1% year-over-year. The robust top-line benefited from price increases and higher shipments of bleach and other disinfecting products in Latin America due to increased demand related to the H1N1 flu pandemic.

Balance Sheet

Clorox’s gross margin expanded 390 basis points (bps) to 43.9% versus 40.0% in the year-ago quarter. The increase was primarily driven by the benefit of lower commodity costs, strong cost savings and price increases. Operating margin rose by 200 bps to 12.7% from 10.8% in the prior-year period, primarily due to higher gross margin partially offset by increased selling & administrative and advertising expenses.

At quarter end, Clorox had cash and cash equivalents of $154 million, compared to $97 million in the year-ago quarter. During the quarter, the company generated $152 million of cash from operations, compared to $98 million in the year-earlier period.

Outlook

Looking ahead, Clorox raised its guidance for fiscal 2010. Annual earnings are now expected to be in the range of $4.10 to $4.25 per share, compared to previous guidance of $4.05 to $4.20 per share. The guidance is in-line with the Zacks Consensus Estimate of $4.22 per share, derived from 16 covering analysts, which moved down by a penny over the past month.

Net sales growth for the year is reiterated in the 1% to 2% growth range, while gross margins are now expected to improve in the 150 to 175 bps range, compared to the earlier prediction of a 100 to 150 bps improvement.

Zacks Investment Research

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Clorox (CLX) Dividend Stock Analysis (Dividend Growth Investor, 5/14/10)
Read more on Clorox Company at Wikinvest

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