Can Clorox Deliver a Q2 Earnings Beat Despite Cost Headwinds?

The Clorox Company CLX is slated to report second-quarter fiscal 2026 earnings on Feb. 3, after market close. The company is expected to register year-over-year top and bottom-line declines when it posts the numbers.The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $1.63 billion, indicating a decline of 3.3% from the prior-year quarter’s actual. The consensus mark for quarterly earnings per share (EPS) has decreased 2.1% in the past 30 days to $1.43 per share, indicating a decline of 7.7% from the year-ago quarter.CLX has a trailing four-quarter earnings surprise of 10.2%, on average, including a 9% surprise in the last reported quarter.What the Zacks Model Unveils for CLXOur proven model does not conclusively predict an earnings beat for Clorox this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.Clorox currently has an Earnings ESP of -1.04% and a Zacks Rank #3.Things to Know Ahead of CLX’s Q2 EarningsClorox has been facing elevated cost pressures that are expected to weigh on profitability throughout fiscal 2026. Rising expenses across manufacturing, logistics and promotional spending, driven by persistent inflationary trends and intensified competition in value-focused categories, are expected to have resulted in higher costs in the to-be-reported quarter. Additionally, Clorox expects to absorb higher trade promotional costs to support competitive pricing and consumer demand, especially in categories like cat litter and trash bags. These costs are likely to have weighed on the company’s operating margin in the fiscal second quarter.Our model expects operating income to decline 8.4% year over year in the fiscal second quarter, with a 90-bps contraction in operating margin. Clorox also faces mounting near-term headwinds from rising costs, global economic pressures and intensifying competition, all of which threaten to weigh on its profitability in the near term. Clorox’s second-quarter fiscal 2026 is expected to be an earnings-challenged period as the company digests ERP-related disruptions and navigates persistent macro and category headwinds. The company expects the ERP Transition effects to remain a significant near-term headwind, impacting second-quarter fiscal 2026 results. The company’s outlook assumes a dynamic, volatile and uncertain external environment throughout 2026. The company expects consumers to remain highly value-conscious, with overall category consumption staying sluggish throughout the year and showing variability across channels and periods, which should weigh on the fiscal second-quarter revenues. Competitive intensity is likely to remain elevated, while tariff-related uncertainty continues to pose a risk. The company’s outlook also incorporates the impact of the divestiture of the Better Health VMS business.On the last reported quarter’s earnings call, Clorox projected second-quarter fiscal 2026 net sales to decline in the low single digits, driven by consumption decline and the timing impact from the fiscal first quarter. Management expected the fiscal second-quarter gross margin to be about flat to down slightly relative to the year-ago quarter. Our model predicts gross profit to decline 2.9% year over year to $717 million in second-quarter fiscal 2026. The gross margin is expected to contract 20 bps to 43.6% in the fiscal second quarter.The Clorox Company Price and EPS Surprise The Clorox Company price-eps-surprise | The Clorox Company QuoteHowever, several positives are expected to underpin Clorox’s fiscal second-quarter performance and set the stage for recovery in the second half. The company remains well-positioned, supported by its strong brand equity, disciplined cost management, and ongoing execution of its IGNITE strategy. Clorox has continued to emphasize innovation and premiumization through superior product offerings and price-pack architecture designed to meet evolving consumer preferences.The company’s holistic margin-management program, focused on cost savings, mix optimization and productivity gains, is expected to have continued to generate fuel for reinvestment in growth initiatives. These efforts are likely to strengthen profitability and provide flexibility to sustain elevated marketing and digital investments despite near-term headwinds.Additionally, Clorox is nearing completion of its multi-year digital transformation, including the full-scale rollout of its U.S. ERP system. This modernization, which accounts for about 70% of the company’s $560-$580 million transformation investment, is designed to enhance supply-chain responsiveness, demand planning accuracy and overall operational efficiency. The new ERP platform is expected to improve visibility and agility, enabling faster, data-driven decision-making across the organization.Together with a robust pipeline of consumer-led innovation and continued investments in brand superiority, these initiatives are expected to lay a stronger foundation for sustainable growth once the temporary ERP-related disruptions subside.CLX’s Price Performance & ValuationFrom a valuation perspective, CLX stock is trading at a discount relative to the industry. CLX has a forward 12-month price-to-earnings ratio of 17.13X, below the Consumer Products - Staples industry’s average of 18.15X.Image Source: Zacks Investment ResearchCLX has lost 2.5% in the past three months, underperforming its industry’s decline of 0.2% in the same period.Image Source: Zacks Investment ResearchStocks With the Favorable CombinationHere are a few companies, which, according to our model, have the right combination of elements to beat on earnings this reporting cycle.The Estee Lauder Companies EL currently has an Earnings ESP of +6.62% and flaunts a Zacks Rank of 2. EL is anticipated to register increases in its top and bottom lines when it reports second-quarter fiscal 2026 results. The Zacks Consensus Estimate for Estee Lauder’s quarterly revenues is pegged at $4.2 billion, indicating growth of 5.3% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for Estee Lauder’s bottom line has moved up 3.8% in the past 30 days to 83 cents per share. This implies a surge of 33.9% from the year-ago quarter’s reported figure. EL delivered an earnings beat of 82.6%, on average, in the trailing four quarters.Hershey HSY currently has an Earnings ESP of +1.66% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports fourth-quarter 2025 numbers. The Zacks Consensus Estimate for HSY’s quarterly revenues is pegged at $3 billion, which indicates growth of 3.6% from the prior-year quarter. The Zacks Consensus Estimate for Hershey’s quarterly earnings per share is pegged at $1.40, suggesting 48% decline from the year-ago reported number. The consensus mark has been unchanged in the past 30 days. HSY has a trailing four-quarter earnings surprise of 15%, on average.Archer Daniels Midland Company ADM has an Earnings ESP of +2.41% and a Zacks Rank #3 at present. ADM is likely to register growth in its top line when it releases fourth-quarter 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $22.3 billion, which implies growth of 3.8% from the figure in the prior-year quarter.The consensus estimate for Archer Daniels’ bottom line has moved down by a penny to 83 cents per share in the past 30 days. The estimate indicates a decline of 27.2% from the year-ago quarter’s reported figure. ADM delivered a negative earnings surprise of 4.3%, on average, in the trailing four quarters.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They includeStock #1: A Disruptive Force with Notable Growth and ResilienceStock #2: Bullish Signs Signaling to Buy the DipStock #3: One of the Most Compelling Investments in the MarketStock #4: Leader In a Red-Hot Industry Poised for GrowthStock #5: Modern Omni-Channel Platform Coiled to SpringMost of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.See Our Newest 5 Stocks Set to Double Picks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Hershey Company (The) (HSY): Free Stock Analysis Report Archer Daniels Midland Company (ADM): Free Stock Analysis Report The Estee Lauder Companies Inc. (EL): Free Stock Analysis Report The Clorox Company (CLX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks