Shares of Clorox were falling sharply early Friday after the maker of disinfectant wipes and other cleaning products reported fiscal second-quarter adjusted earnings that missed analysts' expectations and said margins would take a steep hit from continued cost pressures.
Clorox (CLX) was down 12.4% to $144.84 in premarket trading Friday. Following Thursday's close of trading, the stock has declined 5.2% in 2022 and has dropped 13.7% for the past one year.
Clorox earned an adjusted 66 cents a share in the quarter on sales of $1.69 billion, down 8% from a year earlier. Analysts polled by FactSet were expecting adjusted earnings of 84 cents a share on sales of $1.66 billion.
Gross margin in the second quarter declined to 33% from 45% a year earlier.
For the fiscal year ending in June, Clorox said it expected a gross margin decline of about 750 basis points, "primarily due to higher-than-previously-anticipated commodity and manufacturing & logistics costs." The company said it was assuming a "return to gross margin expansion" in the fourth quarter.
Clorox said it expects net sales for the fiscal year to fall 1% to 4%, vs. earlier guidance of a drop of 2% to 6%. Adjusted earnings for the year were forecast at between $4.25 and $4.50 a share, below prior guidance of $5.40 and $5.70 a share.
By the fourth quarter, Clorox said it expects sales to return to its long-term sales growth target of 3% to 5%.
Analysts surveyed by FactSet expect fiscal-year earnings of $4.93 a share.
"In the face of a challenging cost environment, we're executing well on the factors we control. We're driving cost savings and pricing to mitigate inflationary headwinds, while also continuing to meet strong demand across our portfolio," said Chief Executive Officer Linda Rendle in a statement.
"Although we expect cost pressures will continue through fiscal year 2022, we're confident we have the right strategy and are taking the right actions to strengthen our competitive position, build a stronger, more resilient company, and create long-term shareholder value," the CEO added.
Analysts at RBC Capital Markets said in a research note Friday they would "remain on the sidelines given the margin outlook in the near term." RBC adjusted its fiscal 2022 organic growth estimate for Clorox to down 1.3% from down 2.2%, and lowered its earnings estimate to $4.27 a share from $5.43.
RBC reduced its price target on Clorox stock to $163 a share from $176. It maintained its Sector Perform rating.
J.P. Morgan analysts cut their price target on Clorox to $137 a share from $157. They rate the stock Underweight.