Clorox could be in for a rocky year, and investors should look to move their money elsewhere, according to JPMorgan. On Monday, Clorox reported stronger-than-expected earnings and revenue for its fiscal first quarter. However, analyst Andrea Teixeira downgraded Clorox to underweight from neutral, saying that the quarter's success does not appear repeatable. "We think most of the FQ1 beat will reverse in FQ2, as the pull forward in FQ1 was due to retail inventory normalization, pantry stocking with the Delta variant, stronger back-to-school YOY and a more normalized cold & flu season. As such, we now expect FQ2 sales to decline double digits, and cost pressures to be steeper in FQ2," Teixeira wrote. The company also confirmed its full-year guidance but did say gross margins would decline in the next two quarters before expanding again. That leaves a potential guidance cut on the table in the months ahead, according to JPMorgan. "Management is not embedding spot prices for commodities costs in this outlook (as [overweight-rated Procter & Gamble] does for instance), but rather assuming raw material ... costs will decline in the back end of the fiscal year, which we find somewhat risky given the lack of visibility for the commodities curves and the additional pressures from transportation and labor lingering," the note said. Shares of Clorox have struggled this year, falling 18%. JPMorgan cut its price target to $147 per share from $171 per share, representing a downside of 10% from where the stock closed Monday. -CNBC's Michael Bloom contributed to this report.
Colorox brand toilet bowl cleaner sits on display at a supermarket in Princeton, Ill.
Daniel Acker | Bloomberg | Getty Images
Clorox could be in for a rocky year, and investors should look to move their money elsewhere, according to JPMorgan.