13. The Clorox Company (NYSE:CLX)
Average Analyst Rating Score: 3.2
The Clorox Company (NYSE:CLX) is a California-based manufacturer of consumer and professional products. The company currently offers a quarterly dividend of $1.20 per share and has a dividend yield of 3.59%, as recorded on June 14.
Last year, The Clorox Company (NYSE:CLX) suffered from cyberattacks and is still struggling with the aftermath. In fiscal Q3 2024, the company reported a 5% year-over-year decline in its sales at $1.81 billion. The decrease was primarily due to lower volume from temporary distribution losses caused by the widespread disruptions of the cyberattacks. The attacks also disrupted production, leading to uncertainty in the company’s operations. Its year-to-date operating cash flow also declined significantly by 51% to $355 million.
The Clorox Company (NYSE:CLX) reached its all-time high in August 2020 when it was trading at around $237 apiece. Since then, the stock has declined by nearly 44%. Volume growth has been difficult to achieve for the company since COVID-19 led consumers to buy its products rapidly. The company’s 2024 outlook indicates that it is still grappling with demand challenges, as organic sales are expected to increase only modestly in FY24. The company has also lowered some aspects of its guidance, putting additional pressure on the stock. Management expects sales will hit the lower end of the revised estimate range from early February. In addition, earnings growth is projected to be slower than initially planned due to weak results in Q3.
Last month, Barclays highlighted in its investors’ note that companies that managed to raise prices faster than inflation are at a greater risk if the economy faces demand and persistent inflation pressures. The firm added The Clorox Company (NYSE:CLX) to that list. Analysts have maintained a consensus Hold rating on the stock, which makes CLX one of the worst dividend aristocrat stocks on our list. Bireme Capital also discussed The Clorox Company (NYSE:CLX)’s pricing strategy in its Q4 2023 investor letter.
“As we entered the second half of 2023, the valuation of many consumer staples companies perplexed us. The SPDR Consumer Staples ETF traded at a healthy 24x earnings despite low-single-digit projected earnings growth and a dramatic rise in interest rates. On top of the rich valuations, many of the underlying businesses face long-term headwinds and have been papering over volume declines with price increases. We shorted a few of these companies in Q3, including The Clorox Company (NYSE:CLX).
In fiscal 2023 (ended in June), Clorox sold 10% fewer products than the year before. However, they raised prices by 16%, allowing the firm to report 4% revenue growth despite the sharp volume declines. This is not a sustainable way to grow a business. Tobacco companies operate similarly and trade at below 10 times earnings. In contrast, Clorox traded at more than 30x earnings when we initiated our short position.”
At the end of March 2024, 38 hedge funds tracked by Insider Monkey reported having stakes in The Clorox Company (NYSE:CLX), down from 39 in the previous quarter. These stakes are valued at over $1.6 billion collectively. With over 2 million shares, Citadel Investment Group was the company’s leading stakeholder in Q1.
