That day. What day? That day that a professional trader looks at his primary "hands on" portfolio, and sees Clorox (CLX) easily beating the rest of his book, and then scans down to see Amazon (AMZN) firmly entrenched in last place. True story. Only in 2020.
Really Cleaning Up
Clorox reported what is for the firm its fiscal third quarter (period ending March 31st) on Friday morning. The firm really cleaned up. Quarterly EPS printed at $1.89, easily beating consensus, and good enough for earnings growth of 31%. Revenue generation totaled $1.78 billion. That was also a beat, as that number amounts to year over year growth of 14.8%. Organic sales increased some 17%. In addition, this also snaps a three quarter streak of declining sales for Clorox, and I just can not remember when I have seen growth of anything like that for this name.
Not only did the firm sell more product, but largely did so across just about every business line, and at increased gross margin at that. Let's take a look at business units. First up will be the home run hitter, Cleaning. This unit includes the namesake bleach, the namesake disinfectant wipes, and Pine-Sol, and produced sales of $671 million, growth of an astounding 32%. The firm's second largest contribution comes from Household at $500 million, up just 2%, but up nonetheless. That unit includes Glad trash bags, as well as Fresh Step cat litter. Lifestyle (Hidden Valley Ranch, Brita) showed a 10% increase in revenue to land at $339 million, and the smallest contribution came from the International business at $273 million, which was up 11%, even with the negative impact of a strong U.S. dollar. Organic international sales grew 22%.
Clorox has raised full year guidance, as it stands to reason that the forces that impacted sales in March likely increased in April. The firm now sees sales rising 4% to 6%, which would drive revenue toward a range spanning $6.44 billion to $6.77 billion, the lower end above industry consensus of $6.39 billion. After figuring expenses, the firm's outlook for diluted EPS now stands at $6.70 to $6.90. That would be versus the $6.57 that Wall Street was looking for.
On this future, Clorox CEO Benno Dorer said, "With a portfolio that's been relatively resilient during past recessions, the heightened importance of disinfecting products in consumers' lives and strong futures investments in out IGNITE strategy, we're optimistic about our ability to continue to perform well in what's expected to be a challenging economic environment."
What readers will see, I think, is an upward sloping Pitchfork that actually begins prior to the panic driven spike in demand for these shares in mid-March. I have tried to omit that spike from the model, and still the shares threaten to break out of the model for a third time.
Now, if we include that spike, warts and all... we now have a cup, and this pop on Friday is also an attempt at a breakout that appears to have stalled at the new pivot of $197, which is above the price target that I came in with of $195.
What Do I Think?
Honestly? I think I wait a little bit to see if the shares try the pivot point again, and if they do not, by tonight's closing bell, I take a profit on 30% of the position. In my book, you don't screw around when a target price or a panic point is pierced. You do something. Still love the name, just sitting on too large of a gain in this one to risk it all. My new target for the balance of my position now moves to $235.