On Tuesday, Jefferies upgraded Clorox (NYSE:) stock to buy from hold, setting a new price target of $187, up from the previous price of $174. The company highlighted the positive outlook for the company’s future performance, anticipating a return to historical levels of growth and profitability.
Clorox, known for its cleaning and disinfectant products, has faced challenges recently, but Jefferies expects a turnaround. The company expects Clorox to return to its previous position as a company recognized for driving economic earnings growth and return on capital among its peers. Historically, this performance has earned Clorox a valuation premium of about 30% over its competitors.
The upgrade is based on signs of improved overall revenue growth and the potential for increased operating leverage. Jeffries notes that these factors are indicators that Clorox is on its way to recovery.
To further support the optimistic view, Jefferies has provided new earnings per share (EPS) estimates for fiscal years 2025 to 2028, forecasting an 8% compound annual growth rate (CAGR). This exceeds consensus expectations by 6%, indicating confidence in Clorox’s ability to exceed market expectations.
The $187 revised target price reflects Jefferies’ belief in Clorox’s ability to deliver industry-leading growth among peers and return to its historically strong return on capital. The upgrade to Buy represents a notable shift in the company’s assessment of Clorox stock’s performance potential.
In other recent news, The Clorox Company has completed the sale of its Better Health vitamins, minerals and supplements businesses to Piping Rock Health Products, as part of its strategy to reduce business volatility and drive sustainable growth. The company also announced an expansion in profit margin for the seventh consecutive quarter.
Analysts from Exane BNP Paribas (OTC:), Jefferies and Citi revised their price targets for Clorox, citing the company’s ability to regain market share and providing sales growth guidance.
CloroxPro, a subsidiary of The Clorox Company, has expanded its EcoClean line with plant-based disinfectant wipes, demonstrating the company’s commitment to sustainability. The company aims to achieve sales growth of 20-25% in the first quarter of the fiscal year and plans to return to pre-pandemic gross margins. These latest developments underscore Clorox’s commitment to growth and recovery.
These developments follow a period of strategic moves and analyst adjustments, with financial companies expressing confidence and caution regarding the company’s future. Notably, Clorox management has demonstrated a renewed sense of urgency in accelerating the company’s growth, despite challenges including a previous cyberattack and volatile commodity prices.
InvestingPro Insights
Jefferies’ upbeat outlook on Clorox is supported by several key metrics and insights from InvestingPro. The company’s market value is $20.18 billion, which reflects its large presence in the consumer goods sector. Clorox’s financial health is underscored by InvestingPro’s advice that the company has maintained its dividend for 54 consecutive years, demonstrating its strong commitment to shareholder returns. This is consistent with Jeffries’ view of Clorox as a historically strong performer.
The company’s recent performance has been impressive, with a 3-month TSR of 22.4%, supporting Jefferies’ expectations for a return to growth. Additionally, Clorox’s (adjusted) P/E ratio of 33.76 over the trailing twelve months suggests that investors are willing to pay a premium for the stock, which may reflect future growth expectations as indicated in Jefferies’ report.
InvestingPro offers 11 additional tips for Clorox, providing investors with a comprehensive analysis of the company’s financial health and market performance. These insights could be valuable to those looking to delve deeper into Clorox’s investment potential following Jefferies’ upgrade.
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