The Clorox Company Earnings: Margins Shrink, Net Income Drops

S&P 500 (NYSE:SPY) component The Clorox Company (NYSE:CLX) reported its results for the third quarter. Clorox manufactures consumer products that are sold primarily through mass merchandisers, grocery stores, and other retail outlets.

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The Clorox Company Earnings Cheat Sheet for the Third Quarter

Results: Net income for The Clorox Company fell to $132 million ($1.01 per share) vs. $151 million ($1.09 per share) a year earlier. This is a decline of 12.6% from the year-earlier quarter.

Revenue: Rose 7.4% to $1.4 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: The Clorox Company fell short of the mean analyst estimate of $1.04 per share. It beat the average revenue estimate of $1.35 billion.

Quoting Management: “I’m very pleased with our top-line growth in the third quarter,” said Chairman and Chief Executive Officer Don Knauss. “We delivered our highest year-over-year sales growth in more than three years. In our U.S. business, sales grew more than eight percent, and were up more than six percent excluding acquisitions. Our categories continued to recover and our market share reached an all-time high. At the same time, margin results were below expectations and remain an area of focus. Looking ahead, we expect margins to begin stabilizing next fiscal year.”

Key Stats:
Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 1.8 percentage points to 42.3% from the year-earlier quarter. Over that time, margins have contracted on average 1.4 percentage points per quarter on a year-over-year basis.

After beating analyst estimates for the two previous quarters, the company fell short of forecasts. In the second quarter, it topped the mark by 13 cents, and in the first quarter, it was ahead by 9 cents.

Revenue has now increased for three quarters in a row. In the second quarter, revenue rose 3.6% to $1.22 billion while the figure rose 3.1% in the first quarter from the year earlier.

Net income has increased 67.6% year-over-year on average across the last five quarters. The biggest gain came in the second, when income climbed fivefold from the year-earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.32 per share to $1.28, indicating that analysts are growing pessisimistic about the company’s performance next quarter. Over the past three months, the average estimate for the fiscal year has climbed from $4.07 per to share to $4.09.

Competitors to Watch: Zep, Inc., The Procter & Gamble Co., Church & Dwight Co., Inc., Ocean Bio-Chem, Inc., PURE Bioscience, Source Direct Hldgs., Inc., Anpath Group, Inc., and Kyzen Corporation.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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