Energizer (ENR) Beats Q2 Earnings Estimates, Raises Guidance

Energizer Holdings, Inc. (NYSE:ENR) reported second-quarter fiscal 2017 results wherein adjusted earnings of 50 cents per share easily beat the Zacks Consensus Estimate of 34 cents and grew 67% year over year. However, revenues of $359 million missed the consensus mark of $366.5 million but grew 7.5% year over year. The year-over-year growth was driven by sales from auto care acquisition.

Moreover, organic revenues were unchanged year over year as retailer inventory “de-load” offset gains from distribution space, better product and price mix.

Quarterly Details

Batteries revenues fell 0.4% year over year to $309.9 million while revenues from “Other” segment more than doubled to $49.1 million.

In Americas, the company recorded revenues of $218.5 million, up 12.1% from last year’s quarter. Revenues from Europe, the Middle East and Africa region were $74.1 million, down 2.9%, whereas the Asia Pacific region recorded revenue growth of 5.7% year over year to $66.4 million.

Gross margin (excluding unusuals) in the quarter increased a record 390 basis points (bps) to 46.8%. Selling, general and administrative expenses (excluding acquisition and integration costs) as a percentage of net sales were 24.5% compared with 24.3% reported in the year-ago quarter.

As of Mar 31, 2017, Energizer had cash and cash equivalents of $372.2 million compared with $287.3 million as of Sep 30, 2016. Long-term debt was $979.8 million compared with $981.7 million as of Sep 30, 2016.

For the six months ended Mar 31, 2017, cash flow from operations came in at $124.3 million and free cash flow amounted to $135.1 million.

As of Mar 31, 2017, the company had repurchased shares worth $8.6 million and paid $35 million as dividends.

Guidance

For fiscal 2017, Energizer now expects adjusted earnings per share in a band of $2.75–$2.85, up from $2.55–$2.75 projected earlier which includes 15–20 cents contribution from the auto care business. Moreover, the company expects revenues to be up in mid single digits with 5–6% “incremental contribution” from the auto care business despite headwinds from currency fluctuations.

Organic revenues are expected to be up in low single digits. Free cash flow is expected to be $190 million and gross margin is expected to increase 100–125 bps up from earlier projection of 50–100 bps. Capex is expected in a range of $30–$35 million.

Stiff competition from regional players remains a major concern for Energizer. Moreover, forex volatility will continue to be a headwind for the company, reducing net sales by 1.5–2.5%.

Currently, Energizer has a Zacks Rank #3 (Hold). In the last one year, Energizer has generated a return of 24.26% as against the Zacks Consumer Product-Miscellaneous Staples industry’s decline of 1.20%.

Better-ranked stocks in the broader tech space include Alphabet Inc. (NASDAQ:GOOGL) , Ollie's Bargain Outlet Holdings (NASDAQ:OLLI) , and Blue Buffalo Pet Products (NASDAQ:BUFF) . While Alphabet and Ollie's Bargain sport a Zacks Rank #1 (Strong Buy), Blue Buffalo carries a Zacks Rank#2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, Alphabet, Ollie's Bargain and Blue Buffalo delivered average positive earnings surprises of 5.74%, 16.8% and 6.83%, respectively.

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