Clorox Stock Falls 7.2% Post Q2 Earnings: Time to Buy or Hold?

The Clorox Company's CLX shares have lost 7.2% since the company reported second-quarter 2025 results on Feb. 3. Although both revenues and earnings beat the Zacks Consensus Estimate, shares fell due to a 15% year-over-year decrease in revenues. The decline resulted from ongoing inventory normalization and strategic divestitures, including the Better Health Vitamins, Minerals & Supplements ("VMS") and Argentina businesses.This decline is in sharp contrast to the 27% revenue growth seen in the prior quarter, which had been temporarily boosted by higher volume reflecting the lapping of the cyberattack. Meanwhile, this performance contrasts with the broader industry’s decline of 1.2%, the Consumer Staples sector’s rise of 0.1%, and the S&P 500’s increase of 0.8% in the same period.CLX Stock's Price PerformanceImage Source: Zacks Investment ResearchDespite the better-than-expected earnings report, investors seem to be assessing the company’s prospects, considering the ongoing operational transitions.More Insights Into CLX’s Revenue Decline & OutlookClorox's second-quarter fiscal 2025 performance was impacted by declines across all key business segments, reflecting ongoing headwinds. The Health and Wellness segment saw a 13% drop in sales, driven by lower volume and an unfavorable price mix, leading to a 25% decline in segment-adjusted EBIT.The Household segment experienced an 11% revenue decline, with volume contraction as the main factor, while segment-adjusted EBIT plummeted 48% due to higher manufacturing and logistics costs. The Lifestyle segment reported the sharpest revenue drop at 16%, entirely volume-driven, contributing to a 36% EBIT decline. Meanwhile, the International segment fell 12%, largely due to the Argentina divestiture and unfavorable currency rates, though organic sales grew 6%. Despite this, segment-adjusted EBIT still dipped 34%.Additionally, CLX provided a bleak outlook for fiscal 2025, anticipating a net sales decline of 1%-2%, compared with a flat to down 2% projection stated earlier. This includes a 1 to 2 percentage point gain from incremental shipments related to the Enterprise Resource Planning (ERP) transition, which is anticipated to reverse in the first half of fiscal 2026.Organic sales are anticipated to increase 4-7% versus the previous projection of 3-5% growth. The guidance excludes 2 points of negative impacts of the divestiture of the company's business in Argentina and 3 points of unfavorable impact from the sale of the VMS business. Excluding the impact of incremental shipments related to the ERP transition, organic sales are expected to grow 3% to 5%.Is CLX Well Poised for the Long Term?To counter these challenges and drive future efficiency, Clorox is investing $560-$580 million in digital transformation, including ERP replacement and cloud-based platform transitions. About 70% of these costs will be recorded as incremental operating expenses, impacting reported earnings per share. While these investments create near-term pressure, they are expected to streamline operations and support long-term growth. Selling and administrative expenses are forecasted between 15% and 16% of net sales, indicating a 150-bps impact of strategic investments in digital capabilities and productivity enhancements.In the fiscal second quarter, CLX also achieved gross margin expansion for the ninth consecutive quarter, driven by a strong quarter of cost savings and effective demand creation plans. The results underscore the strength of its portfolio as Clorox continues to invest in its brands, delivering superior value and fostering consumer loyalty.Further, the management expects gross margin to expand 125-150 bps compared with the 100-150 bps increase mentioned earlier. The growth is expected to be driven by comprehensive margin management efforts, partly offset by cost inflation and higher trade promotional expenses.Clorox is on track with the IGNITE strategy and the integrated plan. It is also focused on value creation in the long run. CLX’s holistic margin-management efforts have been boosting growth, and the company is on track to revert to pre-pandemic gross margins in fiscal 2025 while investing in the business. Hence, the company concentrates on offering superior value to consumers via investing in its brands and making innovations.What is the Best Approach for CLX?Reflecting the near-term headwinds from weaker earnings and muted guidance, concerns about CLX’s short-term growth persist. However, its long-term strategies provide a solid foundation for recovery. For now, investors may want to wait for signs of stabilization in earnings before considering a position in CLX. Currently, Clorox carries a Zacks Rank #3 (Hold).Three Picks You Can't MissUnited Natural Foods, Inc. UNFI currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. The consensus estimate for United Natural’s fiscal 2025 sales and earnings indicates growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.TreeHouse Foods THS, a private brand snacks and beverages company, presently holds a Zacks Rank #2 (Buy). THS delivered a trailing four-quarter earnings surprise of 20.4%, on average.The Zacks Consensus Estimate for TreeHouse Foods’ 2025 sales and earnings implies growth of 1.2% and 24.9%, respectively, from the year-ago period’s reported figure.US Foods Holding USFD, which engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products, currently carries a Zacks Rank #2. USFD delivered a positive earnings surprise of 3.7% in the last reported quarter.The consensus estimate for US Foods’ 2025 sales and earnings calls for growth of 5.1% and 22.1%, respectively, from the prior-year reported levels.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>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 The Clorox Company (CLX): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report TreeHouse Foods, Inc. (THS): Free Stock Analysis Report US Foods Holding Corp. (USFD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks