Stock markets were stuck in a holding pattern through the first half of Wednesday's trading session. Major benchmarks showed little or no change as most investors waited for the latest move from the Federal Reserve on interest rates.
There's been a lot of focus on the consumer economy, which has held up better than many had expected even in the face of inflationary and other macroeconomic pressures. Household products company Clorox (NYSE: CLX) and home generator specialist Generac Holdings (NYSE: GNRC) both reported their latest financial results, and shareholders were pleased with what they saw from the two consumer-facing companies.
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Clorox cleans up
Shares of Clorox were higher by 6% on Wednesday. The maker of bleach and other cleaning products posted strong fiscal third-quarter results for the period ended March 31, showing the company's resilience even as some pandemic-related tailwinds subsided.
Clorox's financials looked good. Revenue climbed 6% year over year to $1.91 billion, accelerating from the company's growth rate in the year-earlier quarter. Gross margin soared by nearly 6 full percentage points to 41.8%, which reflected the massive efforts Clorox has made to contain costs in the face of commodity inflation and higher operating expenses. Adjusted earnings came in at $1.51 per share, up from $1.31 per share a year ago and better than most investors had expected.
Clorox got its best results from its lifestyle segment, which includes food, personal care, and water filtration products. Sales there climbed 15%, with pre-tax earnings jumping 26% from year-ago levels. The core health and wellness business also produced a 7% rise in revenue despite seeing dramatically lower unit sales volume, and pre-tax earnings climbed 70% on an adjusted basis after accounting for an impairment charge. By contrast, the household segment saw more modest gains of 2% on the sales front and 8% on pre-tax earnings.
Investors were also pleased with an upgrade in Clorox's guidance, with the company now expecting revenue to climb 1% to 2% for fiscal 2023 on a 3% to 4% rise in organic sales. Adjusted earnings of $4.35 to $4.50 per share for the year would represent 6% to 10% annual growth, and that's impressive given falling demand for cleaning products as many consumers return to pre-pandemic behavior.
Generac powers back up
Elsewhere, shares of Generac Holdings soared 16% early Wednesday afternoon. The maker of backup generators for residential and commercial use reported first-quarter results, and despite steep drops from year-ago levels, the company's comments reassured nervous shareholders about its long-term prospects.
Generac's quarterly numbers reflected economic challenges. Revenue was down 22% year over year to $888 million. Adjusted net income plunged by more than two-thirds to $39 million, working out to $0.63 per share in adjusted earnings. Weakness in the residential real estate market showed up clearly in Generac's results; residential product sales fell by nearly half even as commercial and industrial product sales actually gained 30% year over year.
Generac has struggled lately with high inventory levels, but it does see light at the end of the tunnel. Higher-than-average power outage activity helped the company work through its inventory and pointed to the likelihood of more future business. Generac also maintained its full-year guidance, and although it sees overall sales falling 6% to 10% in 2023 compared to 2022, it believes that sales growth will return in the second half of the year.
Shares of Generac had lost as much as two-thirds of their value just since August 2022 before today's pop. As consumers reassert their desire for reliable power, shareholders hope that Generac stock will stay on the upswing.
