Energizer Beats on Q4 Earnings & Revs

Zacks

Energizer Holdings Inc. (ENR) reported fourth-quarter fiscal 2013 non-GAAP earnings of $1.38 per share, which comfortably beat the Zacks Consensus Estimate of $1.32.

Quarter Details

Revenues declined 6.7% from the year-ago quarter to $1.11 billion but beat the Zacks Consensus Estimate of $1.08 billion. The year-over-year decline in revenues was primarily due to customer losses in the Household Products segment and unfavorable foreign currency rates.  

Revenues from the Personal Care segment decreased 0.4% from the year-ago quarter to $592.5 million primarily due to the effect of unfavorable currencies.

Household Products revenues declined 14.4% from the year-ago quarter to $473.6 million. Organic sales increased nearly 3% within Personal Care. The company realized approximately $47 million of gross savings as a result of its 2013 restructuring program.

Gross margin for the quarter was up 190 basis points (bps) to 47.0% from 46.1% reported in the year-ago quarter. Gross margin improved as the decline in cost of goods sold was greater than the decline in revenues.

Operating margin increased 150 bps from the year-ago quarter to 15.0% primarily due to lower-than-expected costs. Year over year, selling, general & administrative expense declined 1.1%, while research & development expense declined 16.7%, primarily due to cost controls and restructuring initiatives.

Advertising and sales promotion expense increased 22.1% due to a change in the spending schedule. The company reported third-quarter restructuring savings of $30.2 million.

Energizer reported non-GAAP net earnings of $87.0 million or $1.38 per share which declined from $112.0 million or $1.76 per share reported in the year-ago quarter. The company also increased its dividend by 25% to 50 cents.

Guidance

Energizer expects fiscal 2014 adjusted earnings to be in the range of $7.25 to $7.50 per share. The company expects net sales of $4,466.0 million. Moreover, the company expects gross margin expansion of 30 bps while SG&A as a percentage of revenues is expected to improve 110 bps.

Recommendation

ENR reported a decent fourth-quarter fiscal 2013 result, with earnings per share and revenues beating the Zacks Consensus Estimate. We believe that product innovations coupled with higher pricing of Energizer’s 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. Also, the company’s partnership with Unilever’s (UN) AXE brand is expected to result in market share gains, going forward. This apart, the acquisition strategy of the company is expected to reap benefits.

However, the expected declines in volumes in Household Product segment, unfavorable foreign exchange and increasing competition from companies such as Kimberley-Clark Corp. (KMB) and Procter & Gamble Co. (PG) are the near-term headwinds.

Currently, Energizer carries a Zacks Rank #3 (Hold).

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