Cost Inflation to Continue to Impact Clorox

By Sam Boughedda

A BofA Securities analyst told investors in a research note that they are reinstating coverage of Clorox (NYSE:) with an Underperform rating and a $130 price target.

“Clorox is a leading global manufacturer of consumer household and professional products, and derives ~84% of its sales from the U.S. Clorox’s products are well recognized by consumers, which include bleach and cleaning products, Pine-Sol cleaners, Liquid-Plumr clog cleaner, Glad bags, Kingsford grilling products, Brita, and many others,” expressed the analyst. “Clorox derives over 80% of its sales from brands which hold the #1 or #2 market share position in their respective categories.”

She explained that its rating and price target reflect a 22x P/E multiple on its CY24e EPS of $5.85.

“CLX’s gross margins fell ~800bps in F22 as the company experienced costs over 10x the typical annual amount across commodities, manufacturing, and logistics,” added the analyst. “We expect cost inflation to continue to be elevated through the next year, but expect to see modest margin improvement in F23 as benefits from pricing, supply chain optimization, and cost savings are mostly offset by continued inflation.”

The BofA analyst also revealed that they believe a “full recovery to pre-Covid levels is farther out than the next two years, due to incremental cost inflation and an increase in demand destruction amid pricing pressure.”