Last Update 05 Dec 25

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.

Modern ERP implementation and digital transformation efforts are expected to improve supply chain efficiencies, reduce costs, and drive sustained margin and earnings growth.
Product innovation and premium offerings in health, wellness, and cleaning are set to regain market share and fuel organic, long-term revenue growth.
Intensifying competition, cost pressures, and shifting consumer trends threaten Clorox's margins, revenue growth, and ability to sustain its premium brand and pricing advantages.

Catalysts

About Clorox

Engages in the manufacture and marketing of consumer and professional products worldwide.What are the underlying business or industry changes driving this perspective?

The full-scale implementation of a modern ERP system is expected to drive long-term operational efficiencies – improving supply chain visibility, speeding innovation cycles, and reducing structural costs – which should support margin expansion and sustained earnings growth once short-term transition noise normalizes.
Acceleration of product innovation and the launch of new platforms in the back half of fiscal 2026 aligns with consumers' heightened demand for superior and differentiated experiences in household, health, and cleaning products, positioning Clorox to regain market share and drive organic revenue growth.
Increased investment and capability in digital marketing and data analytics, coupled with rising e-commerce penetration, will allow Clorox to engage consumers more directly, optimize pricing and promotional strategies, and improve channel mix, boosting both top line growth and net margin improvement.
Ongoing cost optimization initiatives, including holistic margin management and productivity enhancements enabled by digital transformation, are expected to offset inflationary headwinds and tariffs, stabilizing or expanding gross and EBIT margins over time.
Clorox's expanded focus on differentiated and premium innovations (such as green cleaning solutions and wellness-oriented products) is positioned to capitalize on the global health, hygiene, and wellness focus post-pandemic-supporting premiumization, lifting average selling prices, and supporting long-term revenue and earnings growth.

Clorox Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Clorox's revenue will decrease by 0.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 11.4% today to 12.6% in 3 years time.
Analysts expect earnings to reach $881.8 million (and earnings per share of $7.13) by about September 2028, up from $810.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.6x on those 2028 earnings, up from 19.0x today. This future PE is about the same as the current PE for the US Household Products industry at 21.6x.
Analysts expect the number of shares outstanding to decline by 1.19% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Clorox Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Clorox is experiencing sluggish category growth and faces continued uncertainty around consumer demand, with management acknowledging that expectations for category normalization and sustainable top-line improvements remain unclear, which could negatively impact revenue growth in the coming years.
The company is dealing with heightened price competition and deep discounting in key segments like Glad and Cat Litter, as well as increased promotional intensity from private label and competitors; this could compress net margins and reduce overall earnings as Clorox is forced to defend its market share.
Clorox is highly reliant on a few core premium brands for revenue, and when product superiority falters or execution issues arise (especially post-cyberattack in Cat Litter and Kingsford), it can disproportionately impact top-line performance and limit the effectiveness of strategic innovation.
Rising input costs, persistent inflation, tariffs, and continued supply chain pressure pose ongoing threats to gross margins; while management anticipates offsetting these with productivity and ERP benefits, they acknowledge significant uncertainty and volatility in both costs and their ability to fully offset these headwinds.
Secular consumer trends-such as increasing value-seeking behavior, channel shifting to e-commerce, and a gradual uptick in private label and "natural" alternatives in some categories-could erode Clorox's pricing power and brand advantage, resulting in pressured revenues and challenged earnings growth over the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $133.588 for Clorox based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $166.0, and the most bearish reporting a price target of just $115.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.0 billion, earnings will come to $881.8 million, and it would be trading on a PE ratio of 21.6x, assuming you use a discount rate of 6.8%.
Given the current share price of $125.68, the analyst price target of $133.59 is 5.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Lower Clorox Price Target Amid Service Disruptions and Muted Profit Outlook