A Look at Clorox’s Earnings and Risk Factors

Clorox (CLX) is a California-based multinational company that makes cleaning products for consumer and professional markets. It plans to invest about $500 million over the next five years to enhance its productivity and digital capabilities.

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Let’s take a look at the company’s latest financial performance and risk factors.

Clorox’s Fiscal 2021 Q4 Financial Results and 2022 Outlook

For its Fiscal Q4 2021 ended June, Clorox reported a 9% year-over-year drop in revenue to $1.8 billion, missing consensus estimates of $1.92 billion. Adjusted EPS declined 61% year-over-year to $0.95 and missed consensus estimates of $1.36.

For Fiscal 2021, revenue increased 9% to $7.34 billion, but adjusted EPS declined 2% year-over-year $7.25.

Clorox expects its Fiscal 2022 full-year revenue to decline 2% – 6%. It anticipates adjusted EPS for the year to decline approximately 26% to between $5.40 and $5.70. (See Clorox stock charts on TipRanks).

Clorox’s Risk Factors

The new TipRanks Risk Factors tool reveals 36 risk factors for Clorox. The company has updated its risk profile to introduce two new risk factors in its Fiscal 2021 annual report. Clorox also removed five risk factors that it had highlighted in the previous year across categories such as Finance and Corporate, Tech and Innovation, Macro and Political, and Legal and Regulatory.

All of the newly added risks fall under the Finance and Corporate category. In one of the new additions, Clorox cautions investors that certain disputes with the company or its executives can only be resolved in specific courts in Delaware. It says this may discourage investors from bringing up lawsuits that could potentially end in their favor. But Clorox also says it may have to incur additional costs of litigation if forced to resolve disputes with investors outside of its designated courts.

Another new risk factor relates to partnerships. Clorox says it has entered into alliances with other businesses in areas ranging from joint product development programs to promotions and sales. But it cautions that in addition to the relationships not generating the level of sales it anticipates, they may also adversely impact its financial condition and reputation.

Finance and Corporate is Clorox’s top risk category, accounting for 27% of the total risks. That is below the sector average at 34%. Clorox’s shares have declined about 17% since the beginning of 2021.

Analysts’ Take

Following Clorox’s latest earnings report, Morgan Stanley analyst Dara Mohsenian reiterated a Sell rating on Clorox stock and lowered the price target to $160 from $170. Mohsenian’s new price target suggests 5.01% downside potential. The analyst pointed out the Q4 miss and tepid Fiscal 2022 outlook.

Mohsenian commented, “Taking a step back, the good news is that the initial FY22 EPS guidance looks conservative to us, with our $5.80 forecast above CLX’s $5.40-$5.70 range, but even assuming a FY22 beat…CLX is still trading at a too high 23x times CY23 EPS.”

Consensus among analysts is a Hold based on 2 Buys, 5 Holds, and 4 Sells. The average Clorox price target of $163.27 implies 3.07% downside potential to current levels.