Clorox (CLX) Beats Big, Now What? Morgan Stanley Explains the Selloff, Reiterates Underweight
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Morgan Stanley analyst Dara Mohsenian reiterated an Underweight rating and $182.00 price target on Clorox (NYSE: CLX) with new guidance only bridged consensus, and post-COVID risk remaining, with the cycling of unprecedented levels of demand, commodity cost pressure, and normalizing promotion.
The analyst stated "CLX's stock traded down -6.3% (vs. S&P up +1.1%) despite a strong FQ2 beat with organic sales growth of 26%, above the 20.2% Visible Alpha consensus, and raised FY21 EPS guidance, bridging the prior consensus, as we believe the market is looking past near-term results to a post-COVID outlook, similar to other staples names this quarter. We remain UW and continue to worry that FY22 results will be below consensus, with declining volume as CLX cycles unsustainable COVID demand, ramping commodity pressure, and a more normalized promotional environment. In addition, while CLX has recently guided very conservatively, implied F2H21 EPS guidance was well below the prior consensus ($2.90 at the mid point of guidance vs. the prior $3.20 consensus). Net, post the FQ2 beat, we are raising our FY21 EPS by ~3.8% to $8.41, above the high end of CLX guidance, but FY22 EPS by only ~1% to $7.72, which is -4% below the prior consensus. We maintain our PT of $182 on a ~26x CY21 P/E, close to higher growth HPC peers".
Shares of Clorox closed at $191.65 yesterday.
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