Consumer cleaning products manufacturer Clorox (NYSE:CLX) The stock shot up during the pandemic on unprecedented demand for cleaning products, but has since fallen below pandemic levels. While a return of nosebleed levels is to be expected, investors are wondering whether the Mr. Market has overly punished his shares. Markets tend to shoot both up and down. In hindsight, it’s clear that Clorox rocketed when it hit a high of $237.94 in August 2020 and lost nearly half of its value as it crashed through its pandemic low and hit a rocking low of $120.50 in June 2022. reached. Prior to the pandemic, annual revenue growth was 1.5% in 2019, which increased significantly to 8% to 9% during the pandemic years from 2020 to 2021. normalization in his company and the stock price is expected after an outlier event like COVID-19. However, investors are questioning whether the sell-off is too much of an overshoot on the downside, leaving the stock worse off than it was before the pandemic. Clorox benefits from favorable exchange rates and price increases. After all, Clorox wasn’t meant to be a momentum stock, but sentiment has completely turned 180 degrees, turning a pandemic darling into a post-pandemic pariah.
The delay and normalization is not exclusive to Clorox. his colleagues Kimberly Clark (NYSE: KMB), Church and Dwight (NYSE:CHD)and Proctor and Gamble (NYSE:PG) similar destruction in their stocks and underlying companies. Since the pandemic, inflationary pressures have pushed up material, manufacturing and logistics costs, all of which are eroding margins. In addition, the difficult macroeconomic headwind weakening consumer spending causes migration to: cheaper private label and generic brands of cleaning products. Clorox recognizes post-COVID normalization and prioritizes margin rebuilding and 3% to 5% revenue growth as it implements its Ignite strategy.
Skinny and meaner
On August 3, 2022, Clorox released its fourth quarter 2022 fiscal results for the quarter ended June 2022. The company reported earnings of $0.93 per share, which is in line with analyst consensus at $0.93 per share. part. Revenues were down (-0.01%) year-over-year (year-on-year) to $1.8 billion, missing consensus analyst estimates of $1.88 billion. Gross margins remained stable at 37.1% as a result of inflationary pressure in material, manufacturing and freight costs. They were partially offset by pricing and cost-cutting actions. A new, streamlined business model will launch in the first quarter of 2023 and is expected to deliver $75 million to $100 million in annual ongoing savings. The aim is to reduce sales and administrative costs to 13% of sales over time. Clorox CEO Linda Rendle noted, “The streamlined business model we announced today to create a faster, simpler business is designed to increase efficiency, bring decision-making closer to consumers and customers, and enable us better meet their needs, which is another important step in implementing our IGNITE strategy to rethink how we work, complementing the digital transformation initiative already underway.”
Disadvantage Fiscal 2023 Prospects
Clorox gave downward guidance for full year 2023 EPS between $3.85 to $4.22 versus $5.32 by consensus analysts. Revenue growth is expected to range from (-4%) to an increase of 2% or $6.82 billion to $7.25 billion versus $7.34 billion analyst estimates. Gross margins are expected to increase by 200 basis points as supply chain optimization, price increases and cost savings reduce cost inflation. CEO Rendle expects the environment to remain “tough” in fiscal 2023, but she remains committed to delivering 3% to 5% revenue growth over the long term.
The charts say…
Using the gun cards on weekly and daily charts can provide a short-term perspective of the playing field for CLX shares. The weekly gun chart shows a sharp breakdown, led by the declining 5-period weekly moving average (MA) resistance at $137.13, followed by the 15-period MA resistance at $142.07. Shares caused a disturbance after rejecting the $160.59 Fibonacci (fib) level and the cracking of the weekly market structure layer (MSL) buy trigger for $142.90. Weekly stochastics returned down through the 60 band. The daily gun chart formed an inverted pups breakdown, led by the declining 5-period daily MA resistance at $129.76, followed by the 15-period MA at $135.43. The daily 200-period MA and 50-period MA resistances are falling at $147.22 and $142.46, respectively. The daily lower Bollinger Bands (BBs) sit at $121.58, while the daily stochastic stops just above the 10-band. Keep an eye on the charts for peers PG, KMB and CHD as they have a similar formation and a bottom by one can mean a bottom for the whole group. Attractive pullback levels sit at the $119.88 fib, $115.74, $113.57 fib and 2018 lows, $109.48, $103.89 and the $98.61 fib level.