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Key Points: * Brokerage analysts have recently raised forecasts on cleaning product companies and shoemakers * The outlooks for Clorox (CLX) and Church & Dwight (CHD) have improved recently * The slowing economy is not hurting holiday orders for Deckers Outdoor (DECK) and Nike (NKE) This week, I'm going to focus on 2 industries that investors may not expect to beneficiaries of recent positive revisions to earnings estimates. Clean Is Green Clorox (CLX) is best known for its bleach and other cleaning products. What many may not realize, however, is that the company is becoming greener with a new line of environmentally-friendly cleaning products and the acquisition of Burt's Bees. (Burt's Bees produces natural skin and hair care products.) Brokerage analysts think CLX could be giving shareholders more green as well. During the past 30 days, 3 analysts have raised their fiscal 2009 earnings forecasts. These positive revisions have pushed the consensus earnings estimate up 2 cents to $3.69 per share. CLX will report on Oct 31. The company has topped expectations for 4 consecutive quarters. Furthermore, CLX has only disappointed investors twice over the past 4 years. Clorox Is Not Alone Clorox is a Zacks #2 Rank ("buy") stock and is classified in Soap & Cleaning Preparations. This group also contains 1 Zacks #1 Rank ("strong buy") stock, Church & Dwight (CHD), and 1 other Zacks #2 Rank stock, ZEP (ZEP). Within the past 7 days, 1 of the 10 covering brokerage analysts raised his 2008 full-year forecast on CHD. The positive revision was not enough to budge the consensus earnings estimate from $2.85 per share. For 2009, however, 2 brokerage analysts have recently upped their projections. The changes have pushed the average profit forecast up 3 cents to $3.25 per share. Investors seeking income may want to note that CHD raised its quarterly dividend in August. The company has paid dividends for 430 consecutive quarters. ZEP reported its fiscal fourth-quarter results yesterday. Revenues were essentially flat with a year ago, but profits were higher thanks to cost cutting. The company earned 37 cents per share, 5 cents better than the consensus earnings estimate. Revenues were hurt by weakness in the transportation market (ZEP produces degreasers) and a smaller sales force. Higher prices and better sales of retail and food products helped to offset the weakness. CEO John Morgan believes ongoing cost-cutting programs and other internal initiatives should help profitability in fiscal 2009, particularly in the second-half of the fiscal year. So far, earnings estimates for fiscal 2009 are so far unchanged at $1.45 per share. Shoemakers Are Keeping Their Footing Given the current economic backdrop, it would be logical to assume that demand for $150 boots would be weakening. Yet, Deckers Outdoor (DECK) is defying that logic. The company recently preannounced third-quarter revenues of approximately $195 million. The 51% increase is well above DECK's previous guidance for a 34% increase in sales. Earnings will also be above forecasts, though the company did not provide an updated projection. Most of the 7 covering analysts are now predicting $1.81 per share. If achieved, this would be 12 cents above the previous consensus estimate. So what's behind the good news? "Robust" demand for UGG shoes. CEO Angel Martinez observed that he is not seeing any large order cancellations. Furthermore, his key retail accounts claim that "UGG is one of the best performing full-priced brands". Considering the cost of UGG shoes and boots, plus the presence of multiple cheaper knock-offs, this is a bit surprising. But, considering that this winter could be numbing, it does make sense for many consumers to opt for something that will keep their feet warm. DECK is a Zacks #2 Rank ("buy") stock and is classified in Shoes & Retail Apparel. Also in this group is Nike (NKE). Fiscal 2009 forecasts for this Zacks #2 Rank stock have been revised up 13 cents over the past 30 days to $3.99 per share. Late last month, NKE topped expectations for the 5th consecutive quarter. (The athletic shoe and apparel maker has not missed earnings estimates in several years.) Revenues grew by 17% and per share profits rose 12% after adjusting for a prior tax benefit. More importantly, future orders delivery of shoes and clothes for the period of September through January are up 10%. NKE received a huge boost from its Olympics marketing in China, though orders are up worldwide. Related ETFs Several consumer staples ETFs exist, though they all include a mixture of food, beverages and household products. The First Trust Consumer Staples AlphaDEX Fund (FXG) might be the most related, since CHD is its second-largest holding. There is no single ETF that covers apparel and shoe companies. The Consumer Discretionary Select SPDR (XLY) does list NKE as one of its largest holdings, though the fund also has positions in retailers, restaurants and media companies.
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Charles Rotblut is the Vice President of Web Content for Zacks Investment Research and the Senior Market Analyst for Zacks.com. He oversees the editorial staff, manages the market-beating Focus List, Timely Buys and Top 10 portfolios, and plays an instrumental role in the development of new products. For more information, visit www.zacks.com.
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