Analyst cuts estimates for Clorox after auto unit sale, but says deal makes sense for future

Analyst cuts Clorox estimates after auto unit sale

NEW YORK — Clorox Co. will make less money in fiscal 2011 because of the sale of its auto care products, but the deal makes sense for the company in the long-term, an analyst said Friday.

THE OPINION: Barclays Capital analyst Lauren Lieberman cut estimates for fiscal 2011 to $4.38 from $4.58 on the sale. The company announced on Tuesday it will sell the division that makes car-care brands such as Armor All and STP to private equity firm Avista Capital Partners for $780 million in cash. Analysts expect Clorox to earn $4.59 per share, according to Thomson Reuters.

The company, based in Oakland, Calif., announced in May it was exploring options for the business, which had $300 million in sales last year — about 5 percent of total revenue. Clorox makes its namesake cleaning products as well as Fresh Step cat litter, Kingsford charcoal and Hidden Valley Ranch salad dressing. The company had said at the time it wanted to focus more on those businesses.

Lieberman said although earnings are hurt in the short term, the move is smart.

“The strategic rationale for the deal is clear to us as these businesses do not align well with Clorox’s long term growth platforms such as health and wellness and sustainability,” the analyst wrote to clients Friday.

Lieberman predicts that the company will make money from the deal starting in the first quarter of fiscal 2012. The analyst maintained an “Overweight” rating on the stock and $71 target share price.

THE STOCK: Shares of Clorox rose 14 cents to $66.15 in afternoon trading Friday. The stock has traded in a range of $56.36 to $67.86 in the past 52 weeks.