Will Clorox's (CLX) Stock Sustain Momentum Amid Hurdles?

Apart from buying or selling stocks at the right juncture, it is also advisable for investors to hold stocks which provide enough such reason, for the near term at least. The Clorox Company (NYSE:CLX) clearly seems to be one such pick, as the company’s solid prospects and stock price movement cannot go unnoticed.

This Zacks Rank #3 (Hold) company has seen its shares jump 8.1% year to date, 24.9% over the past one year and 48.2% over the past couple of years. Well, this is not all. Notably, this consumer products company’s stock has soared by a whopping 84.3% over the last five years, further highlighting its solid bull-run. So, let’s see what’s driving the stock.

The company’s potential is proven by its solid brand portfolio, unique expansion plans, efficient capital allocation and impressive earnings history. We believe Clorox's diversified brand portfolio positions the company well above its peers to generate above-average industry growth and sustain itself in the current challenging environment.

Clorox’s approach to brand management allows each of its brands to develop further, through rigorous research and development, marketing strategies, financial control and operating leverage. Further, Clorox has always maintained a disciplined capital allocation strategy, focused on making investments to develop its business while using the excess cash to lower debts and enhance its shareholder returns through dividend payouts and share buybacks.

The company also flaunts a splendid earnings history, reflected by the fact that it has outperformed our estimate for four straight quarters now, by an average surprise of 9.1%. Further, management remains optimistic about its cost savings, brand investment and demand creation strategies, which encouraged it to raise its earnings per share and sales forecast for fiscal 2016, despite a tough macro environment.

Overall, management’s confidence in its core business strategies, progress of the 2020 Strategy, and encouraging outlook reflect immense future potential.

However, the company’s significant global presence exposes it to major foreign currency risks, which have also hurt its results in the recent past. Though the company remains confident of its core business strategies, it expects the unfavorable currency fluctuations to weigh on its fiscal 2016 performance. This is reflected by management’s outlook, wherein it expects these headwinds, together with heightened competition and slowing global economies, to impact fiscal 2016 sales. High trade spending also remains a concern for Clorox, as it may affect margins.

So let’s wait and see if Clorox can tide over these hurdles and sustain its strong momentum in the future.

Stocks to Consider

Better-ranked stocks in the consumer-staples sector include Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) , Energizer Holdings, Inc. (NYSE:ENR) , each with a Zacks Rank #1 (Strong Buy), and Newell Brands Inc. (NYSE:NWL) , with a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>