Clorox Analyst Points To Increased Competition In Downgrade

After reporting a third-quarter earnings and sales miss May 1, Clorox Co (NYSE: CLX) has been downgraded by a notable analyst. 

The Analyst 

Argus analyst John Staszak downgraded Clorox from Buy to Hold.

The Thesis

After seeing 4-percent sales growth in the first and second quarters, Clorox posted just 2 percent growth in the third quarter, reflecting increased competition in the bags, wraps and wipes categories, Staszak said in the Friday downgrade note. (See his track record here.) 

Clorox reduced its near-term revenue growth target from 2-4 percent to 2-3 percent. The analyst said he expects Clorox earnings to face pressure from increased promotional spending.

“The shares are currently trading at 23.2-times our revised FY19 earnings estimate, which we think adequately reflects prospects for less rapid growth." 

Argus lowered its 2019 EPS estimate from $6.60 to $6.36 and its 2020 estimate from $7 to $6.70.

Clorox’s cleaning and household segments both saw a 1-percent year-over-year sales decrease in the third quarter, Staszak said. The company’s lifestyle segment saw a 23-percent year-over-year increase, but was still $5 million below consensus estimates, he said. 

For investors interested in the consumer staples sector, the analyst said he recommends Buy-rated Estee Lauder Companies (NYSE: EL).

Price Action

Clorox shares were down 0.22 percent at $146.72 at the close Monday. 

Related Links:

A Few Key Takeaways From Clorox's Analyst Presentation

Pro: Consumer Goods Stocks Surging In 'Clear Change' In Market Leadership