Clorox Stock Faces Challenges Amid Turnaround Efforts

Clorox stock is down 10.1% YTD following disappointing Q2 results. Despite a focus on margin improvement and a promising adjusted earnings forecast, the company grapples with historical volatility and near-term challenges, making it a potential buy for long-term investors.

Date: 11-02-2025

AI Rating: 6

Clorox's recent stock performance is driven by its second-quarter fiscal 2025 results, which have sparked concerns among investors due to a significant 10.1% drop year to date. Despite these challenges, the company is pushing through a turnaround strategy, indicating possible long-term investment value.

**Earnings Per Share (EPS):** Clorox has raised its adjusted earnings per share guidance for fiscal 2025 to a range of $6.95 to $7.35, representing a year-over-year increase of 16% at the midpoint. This is a positive indicator as it suggests improving profitability after previous setbacks from significant charges.

**Profit Margins:** Notably, Clorox has achieved nine consecutive quarters of gross margin expansion, suggesting a successful focus on margin improvement. The company forecasts an expansion of 125 to 150 basis points for gross margins across the full fiscal year, though managing operating margins remains critical as they are still down from pre-pandemic levels.

**Revenue Growth:** In contrast to margin improvements, Clorox's revenue has struggled to gain momentum since the pandemic's boost, flatlining in recent periods. For fiscal 2025, the company guides organic sales growth of 3% to 5%. Although not groundbreaking, this indicates a cautious approach rather than aggressive expansion.

The company's focus on adjusted earnings reflects a more stable view of its core business performance by excluding one-time charges related to restructuring and other investments. This is crucial for building investor confidence.

Looking ahead, Clorox's efforts to modernize internal operations through $560 million in ERP system investments may prove beneficial if they enhance efficiency. However, the effectiveness of its restructuring plans and marketing strategies will be critical in shaping market perception and ultimately influencing its future stock performance.

Stocks: CLX