Clorox Co. investors are cleaning up Monday, as a profit beat and a surprise increase in gross margin, as well as an increased stake by investment giant BlackRock Inc., helped propel the consumer products company’s stock to the best earnings-day performance in 11 years.
The company CLX, +5.05% which brands include Glad, Liquid Plummer and Pine-Sol, as well as Clorox, reported before the open fiscal second-quarter net income that fell to $182 million, or $1.40 a share, from $233 million, or $1.77 a share, in the same period a year ago, which included a one-time tax benefit. But that beat the average analyst earnings-per-share estimate of $1.30, according to FactSet. See Earnings Watch.
Sales rose 4% to $1.47, matching the FactSet consensus. Among the company’s business segments, cleaning sales rose 6% to $500 million, above the FactSet consensus of $488 million, and lifestyle sales grew 25% to $335 million to beat expectations of $318.7 million. That offset a surprise 4% decline in household sales to $393 million from $410 million, compared with the FactSet consensus of a rise to $424 million.
Gross margin increased by 70 basis points (0.70 percentage points) to 43.7%, as the benefits of price increases and cost saving outweighed the drags of higher manufacturing, logistics and commodity costs. In the sequential first quarter, gross margin had decreased by 150 basis points.
The stock soared 7.0% in midday trade, enough to pace all the S&P 500 index’s gainers. That put the stock on track for its one-day gain since Sept. 22, 2014, and the best one-day post-earnings performance since it ran up 9.9% on May 1, 2008, after third-quarter 2008 results were reported.
Clorox affirmed its fiscal 2019 guidance of $6.20 to $6.40 for EPS, sales growth of 2% to 4% and for gross margin to be “about flat.”
“This was a good report from [Clorox],” analyst Bonnie Herzog at Wells Fargo wrote in a note to clients. “We hadn’t expected a gross margin inflection to come until F2H19, and management’s call for gross margin to be [about] flat in FY 2019 now looks conservative.”
Separately, BlackRock Inc. BLK, +0.36% the investment manager with $2.3 trillion in equity holdings as of the latest 13F filing, disclosed Monday that it owned 10,555,837 Clorox shares, or 8.3% of the outstanding shares. That is up from 9,803,752 shares, or about 7.7% of the shares outstanding, that BlackRock owned as of Sept. 30.
The one area of weakness for Clorox, in household, was primarily a result of declines in trash bag and food storage product sales, because of “heightened competitive activity.” That might not have been much of a surprise to investors, following disappointing results from food-storage products maker Tupperware Brands Corp. TUP, +3.31% last week.
Clorox stock has run up 22.4% over the past 12 months, while the SPDR Consumer Staples Select Sector exchange-traded fund XLP, +0.53% has lost 5.3% and the S&P 500 index SPX, +0.45% has slipped 1.8%.