Yahoo Finance Energizer (ENR) Down 12.7% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Energizer Holdings (ENR). Shares have lost about 12.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Energizer due for a breakout? 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 drivers.
Energizer Q1 Earnings & Sales Beat Estimates, Dip Y/Y
Energizer reported first-quarter fiscal 2024 results, wherein its top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics declined year over year.
Q1 Metrics
Energizer’s adjusted earnings of 59 cents per share beat the Zacks Consensus Estimate of 57 cents per share. However, the bottom line decreased 18.1% from the year-ago quarter’s reported figure.
The company reported net sales of $716.6 million, which beat the Zacks Consensus Estimate of $713 million but decreased 6.3% from the year-ago quarter’s reading. Organic sales declined 7.4% in the fiscal first quarter.
The battery business experienced a 7% decrease in sales volume in the fiscal first quarter, stemming from holiday orders placed earlier than the previous year, consequently boosting sales in the preceding quarter and soft performance at non-tracked channels. Concurrently, pricing remained relatively flat during the same period, leading to a net year-over-year decrease in organic sales by 0.4%.
Segments in Detail
Revenues of Energizer's Batteries & Lights segment dropped 8% year over year to $617.8 million. Organic sales declined 9.1%. We note that segmental profit decreased 4.3% to $132.4 million.
Meanwhile, revenues in the Auto Care segment rose 5.7% to $98.8 million from the year-ago period. Organic sales increased 4.8%. However, we note that segmental profit fell sharply 34.9% to $6.9 million.
Margins
In the fiscal first quarter, Energizer’s adjusted gross margin expanded 50 basis points to 39.5%, driven primarily by the Project Momentum savings of $16 million. However, this positive effect was marginally impacted by changes in the product mix, higher product costs and lower pricing.
Excluding restructuring costs, adjusted SG&A expenses increased 3.2% year over year to $117.8 million. This increase was driven by higher labor and benefit expenses, factoring fees, and an environmental charge related to a legacy facility that the company has sold. Adjusted SG&A costs, as a rate of net sales, came in at 16.4% compared with the 14.9% recorded in the prior-year quarter.
Adjusted EBITDA came in at $132.9 million, down 8.7% year over year, whereas the adjusted EBITDA margin contracted 50 basis points to 18.5%.
Other Financial Details
As of Dec 31, 2023, Energizer’s cash and cash equivalents were $241.7 million, with long-term debt of $3,303.3 million and shareholders' equity of $170.6 million. In the fiscal first quarter, ENR paid down $78 million of debt. At the end of the quarter, the company’s net debt to adjusted EBITDA was 5.3 times. Subsequent to the quarter, it paid down an additional $58 million of long-term debt. The operating cash flow for the fiscal first quarter was $178.1 million and the free cash flow was $152.6 million.
Outlook
For fiscal 2024, Energizer expects organic revenues between flat and a low-single-digit decline. The company anticipates its adjusted EBITDA between $600 million and $620 million, with adjusted earnings per share between $3.10 and $3.30.
For the fiscal second quarter, organic revenues are expected to decline 2-3% and adjusted earnings per share are anticipated to be 65-70 cents.
Initially, Project Momentum savings were estimated to be $130-$150 million throughout the program's duration. Markedly, management anticipates savings of $160-$180 million over the program's lifetime. The cash costs required to achieve these savings are projected between $140-$150 million.
For fiscal 2024, expected savings from Project Momentum are pegged at $55-$65 million, with one-time cash costs of $60-$70 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
Currently, Energizer has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Energizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Energizer belongs to the Zacks Consumer Products - Staples industry. Another stock from the same industry, Kimberly-Clark (KMB), has gained 3.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Kimberly-Clark reported revenues of $4.97 billion in the last reported quarter, representing a year-over-year change of +0.1%. EPS of $1.51 for the same period compares with $1.54 a year ago.
For the current quarter, Kimberly-Clark is expected to post earnings of $1.59 per share, indicating a change of -4.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Kimberly-Clark. Also, the stock has a VGM Score of B.
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