Tuesday June 26, 2012
by Stephen Leeb, editor Income Performance Letter
Clorox (CLX) is one of the leading manufacturers and marketers of household products in the US, some of which carry its brand name.
In its arsenal are household cleaners (Pine-Sol, Tilex), laundry additives (Clorox Bleach), cat litter (Fresh Step, Scoop Away), dressings and sauces (Hidden Valley, KC Masterpiece), and more.
Moreover, its October 2007 Burt’s Bees acquisition has extended its product line into several natural personal care product categories.
Clorox’s two large acquisitions (Burt’s Bees for $925 million and First Brands in 1999 for $2 billion) are already behind it, and today its goal is primarily focused on growing its businesses internally.
The stock, meanwhile, sells at a cheaper valuation than the majority of its consumer staples peers due to slower growth.
Some examples: The 2010 sale of its auto care business wasn’t well received by investors, and the new product line launch for Green Works fell short of expectations.
We think this may change in the near future. The company’s been innovative, and has proven that it can execute well.
Moreover, while Clorox has exposure to more than 100 countries, inter- national sales only account for about 20 percent of its total revenues, a positive in an environment of a stronger US and weaker Europe.
Plus, given the current backdrop of lower commodity prices, we think the company is not only likely to reach its own fiscal 2013 earnings target of $4.20-$4.35 per share, but even outperform it.
The stock did admirably well in the bear market of 2008-2009, too. Buy Clorox up to $81 for its 3.7 percent dividend, strong brand name, and accelerating growth.
Learn more about this financial newsletter at Stephen Leeb's Income Performance Letter.