Clorox Hits 52-Week High On Increased Demand For Disinfectant

The Clorox Company (NYSE:CLX) touched a 52-week high of $177.32, before closing the session a tad lower at $175.85 on Mar 5. The stock has been witnessing strong momentum amid a large market run down due to the spread of coronavirus across many countries, including a recent entry in the United States. In preparation for preventing the epidemic spread across communities, there has been growth in demand for hygiene products like disinfecting floor cleaners and wipes all over the world. Notably, Clorox is benefiting in the current situation as it sells disinfectants and its bleach products kill germs on contact. The company has also seen a significant growth in demand for its household products.

Also, Clorox is witnessing strong progress in the core International business. It is on track with its cost-saving and productivity initiatives.

In the past three months, shares of this Zacks Rank #3 (Hold) company have increased 15.8%, outperforming the industry’s growth of 0.6%. Further, the stock has witnessed a solid growth of 14.5% in the year-to-date period, when the market at large fell 3.1%.


Other Factors Narrating Clorox’s Growth Story

Clorox is seeing strong progress in the core International business as it continues to build on the success of the segment's Go Lean strategy. These efforts will help in accelerating profitable growth for the segment. Driven by its IGNITE Strategy, which aims to improve profitability in International business, the company expects to invest selectively in profitable platforms. These investments are likely to result in improved returns from businesses like Burt's Bees and Cat Litter.

The IGNITE strategy mainly binds Clorox on four strategic areas namely, fuel growth through brand reinvestments, innovate to deliver enhanced customer experience, develop product portfolio, and re-imagine its operations. IGNITE’s main principle is ‘Innovating for Good Growth’, delivering sustainable and responsible growth. IGNITE strategy encompasses the long-term financial targets of achieving net sales growth of 2-4%, EBIT margin expansion of 25-50 basis points (bps) and free cash flow generation of 11-13% of sales.

Additionally, Clorox remains committed to investing in innovative products and platforms to deliver frictionless shopping experiences. In second-quarter fiscal 2020, the company witnessed significant top-line gains through innovations in various categories. Based on its IGNITE Strategy, the company has a strong innovation plan with investments in bigger and enduring multi-year innovation platforms that differentiate its products and brands. This is supported by a robust innovation pipeline in the second half of fiscal 2020.

Notably, Clorox's innovation pipeline is led by the Compaction of Clorox Liquid Bleach as well as the launch of Clorox Compostable Cleaning Wipes, Clorox Fabric Sanitizer and Kingsford Pellets, and several innovations in Bags and Wraps and Natural Personal Care, in fiscal 2020. Further, the company plans to invest in expanding innovation platforms such as Clorox Scentiva, Fresh Step Clean Paws, Brita Filtering Water Bottles and Hidden Valley Ready-to-Eat Dips.

Apart from these, Clorox is progressing well with its cost-saving and productivity initiatives. Backed by the IGNITE strategy, Clorox aims at higher cost savings annually by emphasizing more on technology and integrated design. With this, it expects to achieve EBIT margin expansion of 175 bps annually. Further, the company’s cost-based pricing strategy has enabled it to address the inflationary environment that has persisted for over three years. These cost-saving and pricing actions should continue to support its investment in long-term brands and category growth. By the end of fiscal 2020, the company expects to surpass annual cost savings target of 150 bps, supported by meaningful productivity improvements.

Key Picks

The Procter & Gamble Company (NYSE:PG) has a long-term earnings growth rate of 7.4% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

e.l.f. Beauty, Inc. (NYSE:ELF) has a long-term earnings growth rate of 5% and a Zacks Rank #2.

Costco Wholesale Corporation (NASDAQ:COST) has a long-term earnings growth rate of 7.6% and a Zacks Rank #2.

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