Believe it or not, this is an exciting time to be in the household goods business.
Consumer staples giant The Clorox Company (NYSE:CLX) just reported sparkling fourth-quarter earnings, with revenue that grew by 9% and gross profit that rose by a full percentage point. To top it off, the company also boosted its full-year outlook for both profitability and sales. The Procter & Gamble Company (NYSE:PG) investors will recognize that happy tune of growing profits, sales, and outlook, as it’s the same song that P&G played for shareholders last week.
It’s true that Wall Street isn’t ignoring either company. Both P&G and Clorox hit fresh highs over the last few trading days. Still, their shares are each yielding a market-thumping 3%, and I think either could make a great investment at these levels, but for different reasons.
I’ll share those reasons in a moment. First, here’s a quick look at how the two firms stack up:
|Metric||Procter & Gamble||Clorox|
|Market Cap||$206 billion||$10 billion|
What jumps out for me in this table is how evenly matched the valuations are. P&G looks a tad cheaper on a trailing P/E basis. But Clorox can be bought for a lower sales multiple, and it boasts a slightly higher dividend yield. Meanwhile, both seem cheap compared to rival Colgate-Palmolive Company (NYSE:CL) , with its P/E ratio of 21 and its dividend yield below 2.5%.
But while statistics are a good starting point, they can’t tell the whole story. For that, we’ll have to dig into the companies’ latest business results.
A strong fourth quarter
After a couple of sales and profit warnings sent shares diving last year, P&G has finally started to right the ship. It beat the Street’s expectations for flat revenue and profits last quarter by clocking a 2% boost in sales and a 12% jump in earnings. Yes, those results were aided by cost cuts and pricing increases. And no company can keep that up for long. But an uptick in sales volumes also contributed to the beat. P&G even looks to be winning back some market share, as it held or grew share in the majority of its brands in the quarter.
Clorox’s latest earnings were no less upbeat. The company got a clear boost from this year’s strong flu season. Revenue from the cleaning products division, which includes disinfecting wipes, leapt by 15% as customers shelled out to keep their surfaces germ-free in the fourth quarter. But Clorox’s great report was powered by more than just a banner cleaning season. Volumes were up across all geographies and divisions, including a double-digit shipment gain in the Burt’s Bees brand. And Clorox benefited from cost-cutting and higher prices, too, leading to an expansion of gross margin from 41.5% to 42.5%.