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Bull of the Day: Helen of Troy (HELE)

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Helen of Troy Limited (HELE) has one of the hottest consumer brands on the market today: Hydro Flask. This Zacks Rank #1 (Strong Buy) recently raised full year guidance.

Helen of Troy is a global consumer products company with many well-known brands in housewares, health and home and beauty, including OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, Hot Tools and Drybar.

A Big Beat in the Fiscal Third Quarter

On Jan 8, Helen of Troy reported its fiscal third quarter results and blew by the Zacks Consensus Estimate by $0.61, or 24.3%.

Net sales jumped 10.1% to $474.7 million from $431.1 million, as the core business grew 10.7% primarily due to growth in online sales, an increase in brick and mortar sales in the Housewares segment, higher international sales and an increase in sales in the appliance category in the Beauty segment.

Leadership Brands saw sales jump 10.6%, as online sales grew 30%.

Housewares was the segment leader as OXO and Hydro Flask, which is popular with Millennials and GenZers, remained hot brands. It rose 28.2% to $40.3 million.

However there was a slight core business decline in the Health & Home segment of 1.1% and a decline in the personal care category within the Beauty segment even as Beauty rose 5.4%.  

Adding Drybar to Leadership Brands

On Dec 19, 2019, Helen of Troy added another well known brand to its stable of Leadership Brands by acquiring Drybar Products LLC, which includes the trademark, its products and other assets, for $225 million.

It does not include the salons, which will continue to operate independently but will be granted a worldwide license to use the Drybar trademark. The salons will use and sell Helen of Troy products exclusively.

Raised Fiscal 2020 Guidance

Given the strong third quarter, Helen of Troy raised its net sales outlook to the range of $1.65 to $1.675 billion, implying a sales growth of 5.5% to 7.1%, up from its prior guidance of 2.9% to 4.8%.

This increase doesn't include Drybar as the exact date of closing wasn't known.

In the segments, Housewares is expected to remain hot (gotta love the Hydro Flask) with sales growth of 19% to 21%, up from prior expectations of 13% to 15%.

Health & Home is expected to decline 2% to 4%, compared to the prior guidance of a decline in the low single digits.

Beauty is forecast to see sales growth of 3% to 5%, compared to the prior expectation of growth in the low-single digits.

Earnings are expected to be in the range of $8.90 to $9.10.

Earnings Estimates Move Higher

That was above the consensus, so it's not surprising that the analysts have raised their estimates in response.

The Zacks Consensus Estimate for Fiscal 2020 jumped to $9.13 from $8.67, which it above the high end of the company's new range. That's earnings growth of 13.3% compared to Fiscal 2019 where the company made $8.06.

2 analysts also revised estimates higher for Fiscal 2021, pushing the Zacks Consensus up to $9.95 from $9.19. That's another 9% growth in earnings.

Shares Soar to 5-Year Highs

Helen of Troy was overlooked by the Street for years until the shares took off in 2019.

They've skyrocketed 61% over the last year and are no longer cheap, with a forward P/E of 20.3.

But with hot consumer brands like Drybar and Hydro Flask, Helen of Troy is transforming itself into a growth company. It is positioning itself to challenge other hot brands such as Yeti (YETI) and Newell Brands (NWL) stable of consumer products.

For investors looking to get into the hot consumer brands, Helen of Troy is one to keep on your short list.

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