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Clorox Didn't 'Crash And Burn,' But Goldman Sachs Stays Neutral

CLX | August 4, 2016

Goldman Sachs maintains its Neutral rating on Clorox Co (NYSE: CLX, despite its fourth-quarter results missing estimates as higher costs offset volume gains.

The results showed that the company's positive gross margin streak came to an end amid fading input costs benefit and increasing price investments due to stiff competition. But, volume gains displayed "surprising" resiliency.

"While the optics of the strong 4Q volume growth (nearly +6 percent) raises questions of sustainability, we believe the growth is in part sustainable and view the low end of its 2–4 percent organic sales target next year as achievable on volume gains alone," analyst Jason English wrote in a note.

"The high-end, however, strikes us as likely out of reach, especially given onerous comparisons this year," English continued.

In addition, the analyst raised his FY17 estimates to reflect the new accounting changes. English now expects FY17 EPS of $5.45 (up from $5.21) on revenue of $5.96 billion (up from $5.97 billion).

Further, English cut the price target on the stock by $1 to $130 to reflect slowing fundamentals and accounting-adjustment inflation of EPS.

Shares of Clorox closed Wednesday's regular trading session at $131.59, and were up 1.21 percent to $133.18 at time of writing Thursday.

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