Prestige Consumer (PBH) Q2 Earnings Top, Revenues Down Y/Y

Prestige Consumer Healthcare Inc. (NYSE:PBH) delivered second-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate for the third straight time. Earnings also improved year on year. However, the top line in the reported quarter was adversely impacted by inventory reductions.

Q2 Details

The company posted adjusted earnings of 68 cents per share, which outpaced the Zacks Consensus Estimate of 65 cents. This marked its seventh consecutive quarter of earnings beat. Quarterly earnings also improved 4.6% year over year.

Total revenues of $238.1 million exceeded the Zacks Consensus Estimate of $237.2 million. However, the top line inched down 0.5% year over year, while organic revenues (excluding currency effects) remained flat. Top-line results were affected by retailer inventory reductions, which were largely mitigated by robust consumption trends at core categories and solid international unit.

Prestige Consumer Healthcare Inc. Price, Consensus and EPS Surprise

Gross profit came in at $136.8 million, which inched down 0.5% from the prior-year quarter’s figure. Gross margin remained flat year on year at 57.4%. Nevertheless, adjusted gross margin improved 60 basis points (bps) to 58%, primarily driven by product mix.

Adjusted EBITDA was $77.1 million, down 3.7% year over year. Adjusted EBITDA margin contracted 110 bps to 32.4%.

Segment Performance

Revenues in the North American OTC Healthcare segment were $213.9 million, down nearly 1% year over year. The decline is accountable to inventory reductions, compensated by increased consumption at core categories.

Revenues in the International OTC Healthcare segment totaled $24.2 million, up 3.4% from the year-ago quarter’s figure. The upside can be attributed to increased consumption as well as timing of shipments and distributor orders, which were partly negated by currency headwinds to the tune of $1 million.

Financial Updates

The company exited the quarter under review with cash and cash equivalents of $27.9 million, long-term debt (net) of $1,754.1 million and total shareholders’ equity of $1,112.7 million.

During the second quarter, the company lowered its debt by $46 million in the second quarter and repurchased shares worth roughly $50 million. Net cash provided by operating activities in the reported quarter was $50.2 million. Accordingly, cash flow from operations in the first six months of 2020 amounted to $103 million.

As of Sep 30, 2019, the company’s net debt position was about $1.7 billion.

Outlook

Prestige Consumer is optimistic regarding consumption trends across core brands. Management stated that the invest-for-growth strategy has been yielding well. The company is also on track to transition to a new third-party logistics provider. Further the company is on track with its core strategies, efforts to maintain a strong financial profile and maximize capital allocation.

For fiscal 2020, the company lowered its revenue expectation, mainly due to anticipated impacts from currency movements. It now anticipates revenues in the range of $947-$957 million compared with the earlier view of $951-$961 million. Nevertheless, it reiterated organic revenue expectations and expects it to stay flat.

Further, adjusted earnings per share are still envisioned in the range of $2.76-$2.83. In this regard, it had earlier highlighted that adjusted earnings will be more weighted in the second half of fiscal 2020 due to increased A&P and G&A spending in the first half.

Free cash flow is forecasted to be $200 million or more in fiscal 2020.

Price Performance

The Zacks Rank #2 (Buy) stock has gained 5.4% in the past three months against the industry’s decline of 3.2%.

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