Why Is Energizer (ENR) Up 21.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Energizer Holdings (ENR). Shares have added about 21.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Energizer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Energizer Holdings’ Q2 Earnings & Sales Beat Estimates

Energizer Holdings posted better-than-expected results for second-quarter fiscal 2020, wherein both top and bottom lines improved year over year. However, management withdrew its fiscal 2020 view, given the uncertain impacts of COVID-19 on consumer demand and the global economy.

Q2 in Detail

Adjusted earnings came in at 37 cents per share, which surpassed the Zacks Consensus Estimate by a penny and surged 85% from the year-ago quarter’s 20 cents. This can be attributable to improved sales, elevated gross profit and a decline in interest expenses and SG&A expenses.

The company reported net sales of $587 million, which beat the Zacks Consensus Estimate of $579 million. Also, sales rose 5.5% on a year-over-year basis, buoyed by strength in acquired businesses and organic sales growth.

Meanwhile, organic sales grew 2.7% during the quarter, driven by gains from the Spectrum Brands’ Global Auto Care acquisition, partly offset by an unfavorable impact from Argentina operations and currency headwinds.

Segments in Detail

Batteries revenues increased 2% year over year to $427.7 million, while revenues at the Auto Care segment grew 19% to $130.2 million. Revenues at Lights and Licensing segment improved 2.5% to $29.1 million.

In the Americas, the company recorded revenues of $409.9 million, up 7.4% from the year-ago quarter. Revenues at the International segment amounted to $177.1 million, reflecting an increase of 1.3% from the year-ago quarter.

Margins

Energizer’s adjusted gross margin expanded 100 basis points (bps) to 41.6% on gains from pricing and realized synergies’ strong pricing efforts. This was partly offset by the adverse impact of foreign currency, unfavorable product mix and elevated costs related to the COVID-19 crisis.

SG&A expenses, excluding acquisition and integration costs, amounted to $108 million, reflecting a decrease of $4.2 million from the year-ago quarter. This decline was driven by gains from realized synergy owing to the exit of transition service agreement (TSA) and a fall in spending in the back half of the quarter related to COVID-19 restrictions. Further, advertising and sales promotion expenses totaled $22.8 million, highlighting a decline of 7.7% from the year-ago quarter.

Additionally, the company reported earnings before income taxes of $21.9 million in the quarter against a loss of $74 million in the year-ago quarter.    

Other Financial Details

Energizer ended the quarter with cash and cash equivalents of $277.9 million, long-term debt of $3,010.6 million and shareholders’ equity of $373.7 million.

Adjusted free cash flow from continuing operations was $107.3 million year to date. During the quarter, the company paid out dividends of 30 cents per share, which totaled $21 million. It also paid out dividends of $4.1 million for mandatory preferred convertible stock. Further, Energizer repurchased about 980,000 shares for $45 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.61% due to these changes.

VGM Scores

At this time, Energizer has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Energizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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