Jefferies analyst Kaumil Gajrawala upgraded Clorox Company (NYSE:CLX) to Buy from Hold, raising the price forecast to $187 from $174.
The analyst projects that Clorox will return to its former status as a company delivering peer-leading economic profit growth and returns on capital.
Historically, this performance has warranted a valuation premium of 30% compared to its peers.
According to the analyst, topline growth is already showing signs of improvement, and operating leverage is becoming increasingly attainable.
Clorox has lagged behind its peers in growth reinvestments due to challenges such as COVID, supply chain issues, inflation, and cybersecurity from 2020 to 2024.
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However, the analyst notes that this is beginning to change. With ERP deployments primarily expensed and a U.S. rollout expected by fiscal fourth quarter, the company aims to streamline its innovation pipeline, enhance RGM capabilities, and drive SG&A leverage. The analyst forecasts that these changes will lead to earnings beats.
The analyst projects Clorox to achieve a three-year organic sales compound annual growth rate (CAGR) of +3.6% through fiscal 2028. According to the analyst, the company is well-positioned to meet its target of +3-5%, driven by anticipated organic sales growth of +3% in the U.S. and +5.5% internationally, with U.S. sales expected to return to fiscal 2023 levels by fiscal 2025.
Early indicators are promising, as trade spend increases have shown positive results, the analyst adds.
Price Action: CLX shares are trading higher by 0.96% to $164.47 at last check Tuesday.
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