On Wednesday, Citi maintained a Neutral rating on Clorox (NYSE:CLX) but reduced the stock price target to $150 from $155. The adjustment follows observations of Clorox's slowed top-line recovery in the third fiscal quarter (FQ3) post-cyberattack, which had initially seen a significant rebound in the second fiscal quarter (FQ2).
Clorox's overall sales growth (OSG) for FQ3 was reported at 2%, falling short of the consensus estimate of 3%. Excluding international sales, the OSG was down by 6.5%, which was a steeper decline than the anticipated 0.9%.
Clorox experienced underperformance across all segments, with negative volumes and pricing contributing to the results. Despite these challenges, the company expressed optimism about regaining remaining shelf space in the fourth fiscal quarter (FQ4) with the spring resets. Still, Citi notes that the visibility on Clorox's top-line outlook has diminished, as reflected by the slightly lowered OSG guidance.
The company did, however, manage to exceed expectations on the gross margin (GM) front, continuing a trend of positive surprises in this area. As a result, Clorox has raised its full-year 2024 gross margin and earnings per share (EPS) guidance.
Citi acknowledges these positive aspects but cautions that the stock's performance is likely to hinge more on top-line trajectory moving forward. The firm also points out the potential risk to margins in fiscal year 2025 due to the possibility of rising commodity prices.
In conclusion, Citi's stance remains neutral, and the firm has adjusted its stock price target to $150, reflecting the mixed financial indicators and the uncertain outlook for Clorox's sales growth.
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