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Clorox Stock Up; JPMorgan Cuts to Underweight on Cost Concern

Clorox shares rise Tuesday even as analysts voice concern about cost pressures and normalized consumer demand.
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Clorox  (CLX) - Get Clorox Company Report on Tuesday was downgraded by analysts at JPMorgan and received guarded support from others after the household-supplies icon beat Wall Street's first-quarter earnings expectations but warned of persistent cost pressures.

Shares of the Oakland, Calif., company on Tuesday closed 1.2% higher at $165.39.

For the fiscal first quarter ended Sept. 30, Clorox posted net income of $142 million, or $1.14 a share, down from $415 million, or $3.22 a share, a year earlier. Net sales declined 6% to $1.8 billion.

Analysts surveyed by FactSet were expecting the company to report earnings of $1.03 a share and sales of $1.7 billion.

Chief Executive Linda Rendle said that "although the environment remains volatile and we expect cost pressures to persist, our first-quarter performance, coupled with the actions we're taking, put us on track to meet our fiscal 2022 outlook."

JPMorgan analyst Andrea Teixeira downgraded Clorox to underweight from neutral and cut her price target to $147 from $171.

The analyst said the downgrade was due to the increase in expected cost pressures, from $300 million to $350 million. The new figure still assumes improvement in the back end, potentially putting the full-year outlook at risk.

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"Although we believe CLX should ultimately be a long-term beneficiary of consumer habits developed during the pandemic," she said, "we think the FY22 outlook highlights that consumer demand has normalized quicker than initially expected."

In August Clorox forecast full-year sales below analysts' estimates due to easing pandemic fears putting a dent in the company's bleaches, wipes and surface cleaners.

DA Davidson analyst Linda Bolton Weiser raised her price target on Clorox to $162 from $145 but kept a neutral rating on the shares.

The company's first-quarter revenue was higher due in part to pull-forward from the second quarter and its gross margin beat by 1 percentage point, Weiser said in a research note, according to the Fly.

She added, however, that while demand elasticity has improved compared with pre-pandemic levels, she is concerned about potential volume softness following price increases. She added that management's gross-margin outlook could be difficult to achieve.

Deutsche Bank analyst Steve Powers boosted his price target on Clorox to $160 from $156, while keeping a hold rating on the shares. 

The company beat fiscal Q1 estimates, driven by better than anticipated demand across its portfolio, Powers said. 

But the analyst said the quarter also benefited to a degree from shipment timing, resulting in elevated retailer inventory. That inventory is likely to unwind in the second quarter.