CLX: ERP Normalization And Cost Controls Will Drive Earnings Recovery

Analysts have trimmed their price targets on Clorox, collectively nudging our fair value view slightly lower, toward the Street’s new mid range around $117 to $125 per share, as they factor in softer near term results, muted growth expectations, and operating deleverage tied to service disruptions and cautious FY26 and FY27 outlooks.

Analyst Commentary

Analysts broadly view the latest quarter as soft but not thesis breaking, with valuation resets clustering around the low to mid $120s and embedding more modest growth and profitability assumptions. Commentary centers on execution risk around the ERP transition, the durability of demand across key categories, and the pace at which Clorox can re accelerate organic growth into FY26 and FY27.

Bullish Takeaways

• Bullish analysts emphasize that fiscal Q1 results and the lowered full year EPS guidance came in better than worst case expectations, suggesting downside scenarios had already been priced into the stock.
• The revised targets in the $117 to $125 range are framed as a recalibration rather than a wholesale downgrade, with Equal Weight and Neutral ratings signaling that valuation now more reasonably reflects near term operational headwinds.
• Some see potential for sentiment improvement in the second half as supply chain and service disruptions from the ERP transition normalize, creating room for upside if execution stabilizes faster than modeled.
• Within consumer staples coverage, Clorox is viewed as participating in a sector wide estimate reset, which could limit relative downside if broader staples multiples and expectations also compress.

Bearish Takeaways

• Bearish analysts are increasingly concerned about operating deleverage tied to Q1 service disruptions and the ERP transition, which now drives lower margin assumptions and constrains near term earnings power.
• Muted and decelerating growth signals in certain personal and home care categories are feeding into more conservative organic sales trajectories, pressuring top line forecasts into FY26 and FY27.
• Lingering weakness in retail tracking data, combined with softer Q1 and FY26 guidance, is reinforcing a cautious stance around Clorox’s ability to re accelerate volume and regain pre disruption run rates.
• With some targets shifting closer to the low $110s, bearish analysts argue that the risk reward skews unfavorably if execution on cost control, mix, and category growth does not improve meaningfully over the next 12 to 18 months.

What's in the News

• Maintained fiscal 2026 guidance for net sales to decline 6% to 10%, reflecting less than one point of negative impact from the VMS divestiture and FX, while reiterating diluted EPS of $5.60 to $5.95, a year over year decrease of 14% to 9%, including about $0.90 headwind from reversing prior year ERP related incremental shipments (Company guidance)
• Updated share repurchase activity, disclosing buybacks of 329,084 shares for $39.9 million between July 1 and September 30, 2025, bringing total purchases under the May 24, 2018 authorization to 8,395,307 shares, or 6.66% of shares outstanding, for $1.32 billion (Company filing)

Valuation Changes

• Fair Value: Unchanged at approximately $124.59 per share, indicating no material shift in intrinsic value assessment.
• Discount Rate: Edged down slightly from about 6.96% to 6.96%, a negligible move that does not meaningfully alter the valuation framework.
• Revenue Growth: Essentially flat, holding around 1.43% per year, suggesting no meaningful change in long term top line expectations.
• Net Profit Margin: Stable at roughly 12.35%, with only immaterial rounding differences, implying unchanged profitability assumptions.
• Future P/E: Steady at about 20.6x forward earnings, reflecting no notable revision to Clorox’s valuation multiple outlook.