Jefferies analyst Kaumil Gajrawala has issued a positive outlook for Clorox Company (CLX), upgrading the stock to ‘Buy’ from ‘Hold’ and raising the price target to $187 from $174. Gajrawala believes that Clorox is on the verge of a significant turnaround, returning to its former status as a company delivering leading economic profit growth and returns on capital.
Historically, Clorox’s strong performance has warranted a valuation premium of 30% compared to its peers. Gajrawala notes that Clorox has lagged behind its peers in growth investments due to challenges such as the COVID-19 pandemic, supply chain issues, inflation, and cybersecurity threats from 2020 to 2024. However, he sees a turning point on the horizon.
The analyst highlights Clorox’s strategic initiatives to streamline its innovation pipeline, enhance its revenue growth management (RGM) capabilities, and drive SG&A leverage. These initiatives are expected to lead to earnings beats, fueled by the deployment of enterprise resource planning (ERP) systems and a planned U.S. rollout by the fiscal fourth quarter.
Gajrawala forecasts a three-year organic sales compound annual growth rate (CAGR) of +3.6% for Clorox through fiscal 2028. The analyst believes Clorox is well-positioned to achieve its target of +3-5% organic sales growth, driven by anticipated growth of +3% in the U.S. and +5.5% internationally. U.S. sales are expected to return to fiscal 2023 levels by fiscal 2025.
Early indicators are encouraging, with increased trade spending already showing positive results. The analyst’s optimistic outlook is reflected in the stock’s positive price action, with CLX shares trading higher by 0.96% to $164.47 at last check on Tuesday.
Gajrawala’s upgrade and price target increase signal a positive sentiment for Clorox’s future prospects, suggesting that the company is well-positioned to capitalize on growth opportunities and deliver strong returns to investors.
