The Zacks Analyst Blog Highlights: Clorox, Ecolab, Church & Dwight, Procter & Gamble and Westamerica Bancorp

Feb 06, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 6, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The Clorox Company (NYSE: CLX), Ecolab Inc. (NYSE: ECL), Church & Dwight Co. Inc. (NYSE: CHD), Procter & Gamble Company (NYSE: PG) and Westamerica Bancorp. (Nasdaq: WABC).


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Here are highlights from Tuesday's Analyst Blog:

Clorox Shares at All-Time High

Shares of The Clorox Company (NYSE: CLX) hit an all-time high of $80.86 on Monday, Feb 4, just after the company reported a better-than-expected second-quarter results and an upbeat outlook for fiscal 2013. This Zacks Rank #3 (Hold) global consumer product company eventually closed at its highest mark of $79.72 yesterday, representing a healthy return of 18.1% over the last one year. Average volume of shares traded over the last 3 months stands at approximately 923,319.

Drivers that Triggered Momentum

An impressive record of beating the quarterly earnings expectations, a positive fiscal 2013 outlook and a decent dividend yield are the factors that enabled the shares of Clorox to reach a new high.

With respect to earnings surprise, Clorox has been beating the Zacks Consensus Estimate for the last 9 quarters, most recently topping it by 11.1% in the second quarter of fiscal 2013.

Yesterday, Clorox came up with impressive earnings and sales comparisons for the second quarter of fiscal 2013. The company's adjusted earnings of 90 cents per share jumped approximately 13.9% from the year-ago quarter's earnings of 79 cents and beat the Zacks Consensus Estimate of 81 cents.

The company's earnings benefited from improvements in revenues as well as gross margins, offset by higher selling and administration expenses as it continues to invest in information technology (IT) systems.

Net sales elevated 8.5% year over year to $1,325 million from $1,221 million in the year-ago quarter, mainly due to improved prices and volumes. Moreover, total revenue came in ahead of the Zacks Consensus Estimate of $1,270 million. Total volume increased 5% from the comparable quarter last year.

Bolstered by better-than-expected quarterly performance, Clorox raised its sales growth forecast to 3%–5% for fiscal 2013 from 2%–4% forecasted earlier, driven by better category-wise performances, market share gains and further product innovation across its brands.

The company expects operating income margin to expand by 25 to 50 basis points in fiscal 2013, on the back of strong cost savings, the benefit of price increases and flat commodity costs forecasts. Further, the company now anticipates annual earnings of $4.25–$4.35 per share in fiscal 2013, up from the previous guidance range of $4.20–$4.35.

Clorox is also known for its shareholder friendly moves. Since 1983, the company has increased its dividend from 1.875 cents to 64 cents. This currently yields a solid 3.21%, while the company has a payout ratio of 59%. We believe that its continuous dividend payments and increments reflect the growth potential of its earnings and cash flow generation capabilities.

Besides Clorox, other consumer products companies like Ecolab Inc. (NYSE: ECL), Church & Dwight Co. Inc. (NYSE: CHD) and Procter & Gamble Company (NYSE: PG) also focus on improving shareholder value by paying regular quarterly dividends.

Stock's Key Indicators

Clorox currently trades at a forward P/E of 18.52x, slightly above the peer group average of 18.47x. Again, its price-to-sales ratio of 1.86 is in line with the peer group average. Moreover, the company's return-on-investment (ROI) and return-on-asset (ROA) are 32.2% and 12.5%, respectively, which are significantly higher than the peer group average. The company's strong fundamentals are well supported by its long-term estimated EPS growth rate of 8.4%.

Westamerica Remains Underperform

On Feb 4, 2013, we reiterated our long-term recommendation on Westamerica Bancorp. (Nasdaq: WABC) at 'Underperform'. This reflects the company's dismal fourth-quarter results, which went down both sequentially and on a year-over-year basis.

Why Underperform?

Westamerica's fourth-quarter earnings of 70 cents per share declined from the prior-quarter earnings of 73 cents and the year-ago earnings of 77 cents. The results were adversely impacted by sluggish top-line growth, partially offset by lower operating expenses. However, improving credit quality and stable capital ratios were the tailwinds for the quarter.

Following the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone down 1.8% to $2.75 per share. Likewise, the Zacks Consensus Estimate for 2014 has also declined (down 1.4% to $2.77 per share). With the Zacks Consensus Estimates for both 2013 and 2014 going down, the company now has a Zacks Rank #4 (Sell).

Further, Westamerica's net interest margin (NIM) has been falling over the last several quarters owing to the challenging economic environment. Sluggish economic recovery and the Federal Reserve's decision to keep short-term interest rates low through mid-2015 are expected to keep NIM under pressure going forward.

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