Well performed stocks are always hit among investors as risks are low. The Clorox Company (CLX, Financial) is one of those stocks in the industry that has been performing remarkably well. This global consumer product giant has provided strong quarterly performances, and since 1977, it has increased its dividends each year. Further, the company’s fact sheet has shown from June 30, 1994 through June 30, 2014, Clorox has the maximum cumulative total shareholder return compared to its peers.
This Oakland, CA, based company sells its products through mass retail outlets, e-commerce channels, distributors, and medical supply providers. Clorox operates through four segments: Cleaning, which consists of laundry, home care and professional products; Household, which consists of bags and wraps, charcoal, cat litter; Lifestyle, which consists of dressings and sauces, water filtration, natural personal care; and International, which consists of products sold outside the United States.
Performance check: Impressive figures posted
On Feb. 4, 2015, this consumer staple giant reported its second quarter results which ended on Dec. 31, 2014. The company’s net sales rose nearly 3% year over year to $1,345 million from $1,308 million in the year-ago quarter, mainly driven by higher volume and the benefit of price increases, partially offset by the impact of 3 percentage points from unfavorable foreign currency exchange rates. In the second quarter, Clorox delivered earnings from continuing operations of $128 million, or 97 cents diluted EPS, compared to $118 million, or 90 cents diluted EPS, in the year-ago quarter. Volume increased 4%, reflecting shipment growth in all four segments.
Clorox’s second-quarter gross margin increased 10 basis points to 42.5%, and year-to-date net cash provided by continuing operations was $267 million, compared with $222 million in the year-ago period. In December 2014, the company issued $500 million in senior notes, increasing the company's quarter-end cash balance, with proceeds subsequently used to pay down a portion of notes that matured on January 15th of this year. A chart has been provided below for the company’s segment's performance.
Volume growth in the cleaning segment was driven by double-digit gains in Professional Products, reflecting increases in its cleaning and health care businesses, which were driven, in part, by Ebola and Enterovirus concerns.
Household segment’s volume growth was driven primarily by gains in Bags and Wraps behind innovation and increased distribution of Glad OdorShield trash bags. Cat Litter also grew volume behind new Fresh Step extreme light weight cat litter.
Volume results in the Lifestyle segment were driven by strong double-digit gains in Natural Personal Care, largely due to innovation in Burt's Bees lip and face-care products, including continued growth in towelettes. Incremental demand-building programs, including the first-ever television campaign for the Burt's Bees brand, also contributed to Natural Personal Care's strong sales results.
International segment's volume growth reflected gains primarily in Mexico, Canada, Europe and Argentina.
Positive outlook
Clorox expects sales for fiscal 2015 to grow 1% and EBIT margin to remain unchanged year over year. It continues to anticipate moderate gross margin expansion in fiscal year 2015, reflecting the benefits of cost savings and price increases. The company expects its effective fiscal year 2015 tax rate to be about 34%. Further, earnings per share are now expected to be in the range of $4.40 to $4.55 as against previously guided range of $4.35 to $4.50. On Feb. 25, 2015, the U.S. Environmental Protection Agency has recognized Clorox with two Climate Leadership Awards for Excellence in Greenhouse Gas Management.
Why Clorox?
Clorox’s 3D innovation supports its goal of growing share and categories. The multinational manufacturer and marketer of consumer and professional products has a solid pipeline of innovation and cost savings including SG&A. The company’s higher FY15 outlook reflects a balanced view of macro economic factors. Further, strategy 2020 is Clorox’s focus where investments behind profitable growth are working, and it is also introducing strategy acclerators. Clorox has a strong track record margin benefit from cost savings. Further, it expects its free cash flow ranging between 10% to 12% of sales in the long run.
On a concluding note
Overall Clorox is a solid company with big share brands in the mid-sized categories, and over 80% of its portfolio has no. 1 or no. 2 share. It has a strong position in categories with private label exposure, and its approach to innovation are also broad-based. Clorox has repurchased nearly 40% of shares outstanding over the last 10 years. The company has enough opportunity to grow in the future with its innovative products, strong sales, and healthy dividend track record. Further, Clorox believes that the forex headwinds are likely to lessen over the long-term which will help to increase its growth. I feel bullish that Clorox will continue its trend and won’t let its valued investors as well as customers down in the long run.
