2023-05-03 09:55:19 ET
Clorox ( NYSE: CLX ) was cut to a Sell rating at CFRA despite an earnings beat offered on Tuesday evening.
For the fiscal third quarter reported on Tuesday evening, $1.51 in earnings per share beat consensus estimates by $0.29 while $1.91B came in $90M stronger than consensus expectations as price increases offset volume declines. Gross margin expanded 590 basis points year over year to 41.8% largely due to pricing actions as well.
Management hiked its full-year guidance on the back of the strong results and touted resilient demand despite elevated sticker prices. Shares rose about 3% on Wednesday following the results, touching a 52-week high.
However, the yearly high leaves the downside risk pronounced, according to CFRA. While the firm raised its price target to $145 from a prior $143, a downgrade was nonetheless issued.
“With better-than-expected elasticities, CLX lifts its net sale guide to +1.5% from flat (midpoint) and adj-EPS to $4.35-$4.50 from $4.05-$4.30. The top-end of guide assumes continued F3Q demand,” equity analyst Ana Garcia wrote in an appraisal of the print. “We view CLX shares as overpriced considering EBIT margins are 500 bps below pre-pandemic levels and expect both price realization and margin expansion to be challenged.”
Read more on the details of the earnings results .
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Clorox cut to Sell as CFRA highlights reliance on price hikes