Energizer's EPS Beats, Revs In Line - Analyst Blog
09 Novembre 2012 - 2:34PM
Zacks
Energizer Holdings Inc. (ENR) reported fiscal
fourth quarter 2012 non-GAAP adjusted earnings of $1.76 per share,
which comfortably surpassed the Zacks Consensus Estimate of 1.55
per share and was up from $1.10 per share reported in the
previous-year quarter.
Quarter Details
Total revenue declined 4.6% year over year to $1.14 billion and
was in line with the Zacks Consensus Estimate. The decline was
primarily due to weak organic sales (down 1.5% year over year) and
unfavorable foreign exchange (negative impact of 3.1%). Moreover,
weak segment performance also affected the revenues.
Personal Care (52% of total revenue) decreased 2.5% year over
year to $590.1 million, primarily due to negative impact of
currency (down 3.0% year over year), which fully offset the
marginal year-over-year increase in organic sales. The decline was
primarily due to decline in Wet Shave sales (down 2.4% year over
year), Feminine Care (down 13%) and Infant Care (down 7% year over
year), which fully offset the 11% increase in Skin Care product
sales.
Household Products (48% of total revenue) declined 6.8% year
over year to $553.1 million, primarily due to unfavorable foreign
currency (negative impact of 3.1%) and sluggish organic sales (down
3.7% year over year) in the quarter. Contracting market share and
sluggish household battery market dented the segment’s organic
sales.
Gross profit decreased 3.4% from the prior-year quarter to
$527.4 million. Gross margin expanded 60 basis points (“bps”) on a
year-over-year basis to 46.1%. Gross margin was positively impacted
by increased prices of Household Products and lower trade
promotional expenses in Personal Care segment.
Spending on advertising and promotion (A&P) was down 28.2%
year over year to $99.6 million. Selling, general and
administrative expenses (SG&A) decreased 1.1% year over year to
$215 million. Research and development expenses (R&D) went up
0.6% from the prior-year quarter to $30.6 million.
Operating profit increased 15.1% year over year to $222.3
million. Operating margin improved from 16.1% in the previous-year
quarter to 19.4% primarily due to lower operating expenses.
Net adjusted income jumped 48.1% year over year to $112
million, primarily due to margin expansions and improved operating
performance.
Guidance
Energizer expects fiscal 2013 adjusted earnings per share in the
range of $6.75 to $7.00 per share. Energizer expects its
advertising and promotional expenses to remain or increase from
2012.
From the sales perspective, management expects fiscal 2013 sales
to grow in low-single digits aided by mid-single digit sales growth
in the Personal Care segment. Personal Care segment is expected to
be positively impacted by improvement in the category. However, for
the Household Products segment, management expects a decline in the
low-single digits primarily due to lower volumes.
Energizer’s announced a restructuring program to be completed
over the next two years that is expected to yield pre-tax cost
savings of $200 million on an annualized basis. Management expects
this 75% of the cost savings initiative to improve profitability
and the rest would be ploughed back into the business for long-term
growth perspective.
Recommendation
Energizer’s fourth quarter improved on the basis of stringent
cost control and margin expansions. The company’s Schick Hydro and
Hydro Silk products witnessed increased sales. Moreover, the
company has also witnessed growth in its international markets.
We believe that product innovations coupled with higher pricing
of its household products and the restructuring initiatives would
positively impact its results going forward. Moreover,
lower-than-expected operating expenses and prudent product mix
would expand margins in the near term.
However, declines in volumes in the battery category,
unfavorable foreign exchange and increasing competition from
companies such as Panasonic Corp. (PC) and
Procter & Gamble Co. (PG) are the near-term
headwinds.
We have a Neutral recommendation for Energizer over the long
term (6-12 months). Energizer currently holds a Zacks #2 Rank,
implying a short-term Buy rating on the stock.
ENERGIZER HLDGS (ENR): Free Stock Analysis Report
PANASONIC CORP (PC): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
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