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The Clorox Co (CLX), The Procter & Gamble Company (PG): An Undervalued Industry Giant

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The search for undervalued companies has yielded many results after the recent downturn in the market. However, none stick out more than The Clorox Co (NYSE:CLX). This international titan has fallen over 6.5% from its 52-week high, and is poised for a large run from its current level.

The Clorox Co (NYSE:CLX)

The company

The Clorox Co (NYSE:CLX) is a worldwide leader in the manufacturing and marketing of consumer products. It is home to some of the most popular brands that many consumers use every single day. In fact, 90% of The Clorox Co (NYSE:CLX)’s brands hold the number one or number two ranking in its market:

Brand Market Share Ranking
Clorox Disinfecting Wipes 45% #1
Clorox Toilet Bowl Cleaner 35% #1
Pine-Sol 30% #1
Tilex / Clorox Bath Cleaner 21% #1
Kingsford / Match Light 72% #1
Brita Water Filtration 68% #1
Clorox Bleach 64% #1
Burt’s Bees 20% #1
Liquid-Plumr 37% #2
Clorox Clean-Up Spray 14% #2
Clorox 2 for Colors 26% #2
Fresh Step / Scoop Away 27% #2
Glad Disposal & Food Storage 19% #2
Hidden Valley Salad Dressing 17% #2

Fourth quarter results

On Aug. 1, The Clorox Co (NYSE:CLX) released its fourth quarter report for fiscal 2013. The results were mixed, but positive overall.

  • Earnings per share of $1.38 vs. expectations of $1.34
  • Revenues of $1.5 billion vs. expectations of $1.6 billion
Earnings per share increased 5% and revenue rose 0.4% year-over-year. Gross margin for the quarter expanded 130 basis points to 44%, thanks to cost savings and price increases. Even with the increased revenue, volume in several segments saw a decline from the same period in 2012. However, the strength of The Clorox Co (NYSE:CLX)’s brands will help boost volume back to normal levels, and this could push sales to record highs.

Fiscal 2013 results

Statistic 2012 2013 Year-Over-Year Growth
Earnings Per Share $4.10 $4.31 5.12%
Revenues $5.468 billion $5.623 billion 2.84%
Gross Margin 42.1% 42.9% 80 basis points

Financial results for fiscal 2013 were in-line with analyst expectations. The most notable statistic in the report is the increase in gross margin. By making more profit on its products, The Clorox Co (NYSE:CLX)’s volume could remain flat and still see its revenue rise. Gross margin could easily surpass the 43.5% mark for fiscal 2014.


In the fourth quarter report, Clorox confirmed its outlook for fiscal 2014. The expectations currently call for:

  • 2%-4% sales growth
  • Earnings per share of $4.55 to $4.70
  • Increased cost savings
  • Lower selling and administrative costs
This outlook is in line with the consensus analyst expectations of $4.62 earnings per share on $5.8 billion in revenue. Also, it is safe to assume that 2014 will be the 38th consecutive year with a dividend raise. Increased sales, increased cost savings, and reduced expenses create a recipe for great success.

Free cash flow 

Clorox reported $583 million in free cash flow for 2013, a 36% increase from 2012. This free cash flow is often used to increase distributions to shareholders, as it has raised its dividend every year since 1977. There is no reason for this streak to end anytime soon.

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