Energizer Holdings, Inc. (NYSE:ENR) has provided preliminary results for first-quarter fiscal 2019. Additionally, the company announced that it will provide full results for the first quarter on Feb 5, 2019.
Per the preliminary results, the company’s top line depicts a slip of 0.2% to $572 million from the prior-year quarter’s tally of $573.3 million. Further, organic sales depict an improvement of 1.7% to $9.9 million for the quarter under review.
Moving on, adjusted EBITDA is projected to be $157-$163 million, slightly up from $156.8 million recorded in the prior-year quarter. Also, adjusted EBITDA for the twelve months period ending Dec 31, 2018 is anticipated to be $399-$405 million.
Further, earnings before taxes for the quarter is anticipated to be $90-$95 million, down from $119 million registered in first-quarter fiscal 2017. Adjusted earnings before taxes is expected to be $124-$130 million compared with $124.7 million reported in the prior-year quarter. Both these projections include an unfavorable impact from foreign currency translation of about $10 million. We note that currency headwinds have been a threat to the company’s performance. In fact, gross margin contracted 50 basis points (bps) during fourth-quarter fiscal 2018. Going ahead, Energizer anticipates gross margin to contract 30-70 bps for fiscal 2019. Also, currency headwinds (excluding Argentina) are likely to hurt net sales by 1-1.5% in the fiscal.
Such headwinds have caused the company’s shares to decline 23% in the past three months, against the industry’s growth of 2.3%.
Nevertheless, Energizer focuses on driving productivity by the execution of improvement initiatives, streamlining international organization and optimizing manufacturing footprint. In a recent development, the company has shifted production from its Chinese alkaline battery manufacturing unit to its Singapore facility. This has driven increased cost savings, owing to improved efficiency and scale at this facility. The company expects these projects to boost gross margin rate and lower SG&A expenses in the near future.
Additionally, the company has been actively pursuing strategic acquisitions to expand base and gain market share. In this regard, Energizer recently completed the acquisition of Spectrum Brands’ Global Battery and Portable Lighting Business (announced in January 2018), which will help enhance its international footprint and broaden manufacturing capabilities. It will also accelerate innovation, widen product range and lead to cost efficiencies. Also, Energizer’s Nu Finish acquisition is likely to aid the top line to the tune of about 30-40 bps. We hope that such aspects are likely to boost investors’ optimism in this Zacks Rank #3 (Hold) stock.
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