An American Titan Set to Burn Analyst Estimates

The Clorox Company (CLX 1.11%) is scheduled to release first quarter earnings on October 31 and current projections call for growth on the top and bottom lines. This stock has been hated by analysts, facing downgrade after downgrade, but it has rallied over 7.5% in October and a strong report could propel the stock to fresh 52-week highs. Let's take a look and see if we should be buying the stock now or waiting to see what the quarterly results show.

The consumer products giant
The Clorox Company is a leading manufacturer and marketer of consumer and household products. It is home to some of the most popular brands that we use every single day, such as Clorox wipes, bleach, and disinfecting spray, Tilex, Kingsford, Pine-Sol, Liquid-Plumr, and Burt's Bees. In fact, 90% of Clorox's brands hold the number one or number two market share in its category. 

August mixer
On August 1, Clorox released fourth quarter earnings for fiscal 2013. The results were mixed and look like this:

Earnings per share grew 4.6% and revenue rose 3% year-over-year, while Clorox's gross margin expanded 130 basis points to 44%. Growth slowed for the quarter because of a decline in sales volume, but management was able to offset this decline with product innovation and slight price increases. Management also confirmed fiscal 2014 guidance with projected earnings growth of 5-9% and sales growth of 2-4%, even if volume were to remain flat year-over-year. I believe these estimates are conservative and Clorox's core brands will perform better than expected, with volume growth of 1-3%, causing higher earnings and sales growth.

The Halloween release
Clorox is set to release first quarter earnings for fiscal 2014 on October 31,  and analyst estimates call for about zero percent growth on both the top and bottom lines. Here is an overview of the current expectations:

These flat estimates seem very obtainable for a company of Clorox's size, strength, and market share, so I expect a slight beat on both lines. Even if sales were to remain flat like analysts expect, you must factor in the share repurchases the company has done in the last year. In fact, Clorox bought back roughly 1.5 million shares in the fourth quarter alone; these repurchases reduce the amount of shares outstanding, which increases earnings per share, and makes the remaining shares more valuable. I believe Clorox will have better than expected sales numbers and this paired with the reduction of shares outstanding will boost earnings per share past the current expectations.

Update on the competition
On August 30, we took a look at Clorox compared to two of its top competitors, Proctor & Gamble (PG 1.52%) and Kimberly-Clark (KMB 1.66%). The comparison concluded that all three companies could provide high returns to investors, but Clorox was the favorite due to its small market cap, which gives it the higher possibility to double or of being bought by a competitor. Let's take a look at the performance of each since:

Kimberly-Clark has outperformed the S&P 500's 7.31% growth, while Clorox has slightly underperformed and Proctor & Gamble has widely underperformed. All three companies have favorable forward estimates, high dividends, and strong management teams, so you really cannot go wrong with an investment in any of them; however, I would wait for a pullback in Kimberly-Clark since it is trading within one point of its 52-week high and already exceeded earnings estimates on October 22. 

The Foolish bottom line
Clorox is a great American company with brand strength, high market share, and a dedication to its shareholders. It is projected to grow at a consistent rate over the next several years and its hefty 3.2% dividend will provide additional returns along the way. I am long Clorox and will add to the position on any weakness provided by the market, whether it is before or after the earnings report. Foolish investors should always do their own research before making investment decisions but based on the above analysis The Clorox Company is definitely worth a look.