On Tuesday, Jefferies upgraded Clorox (NYSE:CLX) stock to Buy from Hold, with a new price target set at $187, an increase from the previous $174. The firm highlighted a positive outlook for the company's future performance, anticipating a return to its historic growth and profitability levels.
Clorox, known for its cleaning and disinfectant products, has experienced challenges recently, but Jefferies predicts a shift towards improvement. The firm expects Clorox to revert to its former status as a company recognized for leading economic profit growth and return on capital among its peers. Historically, such performance has garnered Clorox a valuation premium of approximately 30% over its competitors.
The upgrade is based on signs of improving top-line growth and the potential for increased operating leverage. Jefferies suggests that these factors are indicators that Clorox is on the path to recovery.
Further supporting the optimistic view, Jefferies has provided new earnings per share (EPS) estimates for fiscal years 2025 to 2028, projecting an 8% compound annual growth rate (CAGR). This forecast surpasses the consensus by 6%, signaling confidence in Clorox's ability to outperform market expectations.
The revised price target of $187 reflects Jefferies' belief in Clorox's potential to achieve peer-leading growth and a return to its historically strong return on capital. The upgrade to Buy represents a notable shift in the firm's assessment of Clorox's stock performance potential.
In other recent news, Clorox has finalized the sale of its Better Health Vitamins, Minerals, and Supplements business to Piping Rock Health Products, as part of its strategy to reduce business volatility and drive sustainable growth. The company has also reported its seventh consecutive quarter of margin expansion.
Analysts from Exane BNP Paribas (OTC:BNPQY), Jefferies, and Citi have adjusted their price targets for Clorox, citing the company's ability to regain market share and deliver on sales growth guidance.
CloroxPro, a branch of Clorox, has expanded its EcoClean line with plant-based Disinfecting Wipes, demonstrating the company's commitment to sustainability. The company aims for 20-25% sales growth in the first quarter of the fiscal year and plans to return to pre-pandemic gross margins. These recent developments underscore Clorox's commitment to growth and recovery.
These developments follow a period of strategic moves and analyst adjustments, with financial firms expressing both confidence and caution regarding the company's future. Notably, Clorox's management has displayed a renewed sense of urgency in accelerating the company's growth, despite challenges including a past cyberattack and fluctuating commodity prices.
InvestingPro Insights
Jefferies' optimistic outlook for Clorox is supported by several key metrics and insights from InvestingPro. The company's market capitalization stands at $20.18 billion, reflecting its significant presence in the consumer goods sector. Clorox's financial health is underscored by an InvestingPro Tip indicating that the company has maintained dividend payments for 54 consecutive years, demonstrating a strong commitment to shareholder returns. This aligns with Jefferies' view of Clorox as a historically strong performer.
The company's recent performance has been impressive, with a 3-month price total return of 22.4%, supporting Jefferies' prediction of a return to growth. Additionally, Clorox's P/E ratio (adjusted) of 33.76 for the last twelve months suggests that investors are willing to pay a premium for the stock, potentially reflecting expectations of future growth as highlighted in the Jefferies report.
InvestingPro offers 11 additional tips for Clorox, providing investors with a comprehensive analysis of the company's financial position and market performance. These insights can be valuable for those looking to dive deeper into Clorox's investment potential following the Jefferies upgrade.
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