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Morning Bell With Jim Cramer: Cleaning House With Clorox

TheStreet's Jim Cramer looks at Clorox's disappointing earnings, while the CEO says 'our business is fundamentally healthy.'

Stock futures fell Wednesday as Wall Street monitored earnings reports and the spread of the delta variant of COVID-19 across the globe and awaited U.S. jobs data later in the week.

TheStreet's Jim Cramer took a hard look at Clorox  (CLX) - Get Free Report, which forecast full-year sales below analysts' estimates due to easing pandemic fears putting a dent in the company's bleaches, wipes and surface cleaners.

Shares were up slightly Wednesday to $164.58 in premarket trading, after sliding in the previous session.

"Every division was bad," Cramer told Action Alerts PLUS senior analyst Jeff Marks. "Remember the hope was that the cleaning business would be bad year over year, but that the others would be fine. And the others were not."

Cramer: 'Need for Some Radical Action'

The company said it expects fiscal 2022 sales to fall in the range of 2% and 6%, compared with estimates that called for a 1% decline.

Clearly, Cramer said, there is "a need for some radical action."

Several analysts cut their price targets on Clorox shares, or downgraded the shares following the disappointing results.

RBC Capital analyst Nik Modi lowered his price target to $176 from $200, while keeping a sector perform rating.

Modi said the earnings miss was "worse than feared" as slowing demand and rising cost pressures temper the outlook for FY22, adding that he expects a full margin recovery to take some time.

During an interview with Clorox CEO Linda Rendle on "Mad Money," Cramer cited a Morgan Stanley analyst who said the results call into question "the degree of strength of Clorox's underlying business."

Rendle maintained that "our business is fundamentally healthy."

"Health, wellness and hygiene is not going away," she said. "People are doing more things to take care of themselves. They’re drinking more water. They're staying at home more, given the fact that there's hybrid work."

"Our portfolio will benefit from that and we are fully ready to take advantage of that in the future," Rendle said, noting that "we need to get through the next six months."

"What we see in the back half of our year is returning to the low end of our sales algorithm and beginning to expand gross margin in Q4," she said.