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Energizer Holdings Is a Pick With Potential

- By Mrinalini Chaudhuri

Energizer Holdings (ENR), a global leader in the dynamic business of providing power solutions, reported strong first quarter results. Net sales increased during the quarter and the company updated its guidance. During the quarter, it witnessed increased gross margin rate and improved SG&A as a percent of net sales. It has reiterated its full year adjusted EPS outlook.


First quarter performance

Net earnings during the first quarter were $95.6 million, or $1.52 per diluted share, (which was $65.5 million, or $1.05 per diluted share, in the prior year quarter).

Adjusted net earnings in the first quarter were $95.1 million, or $1.51 per diluted share, (which was $72.3 million, or $1.16 per diluted share, in the prior year quarter).

Net sales during the quarter were $559.6 million (which marked an increase of 10.4% from $506.8 million in the prior year quarter).

Organic net sales increased 7.2%.

Gross Margin percentage during the quarter increased by 320 kbps and was 48.5%.

SG&A expenses during the quarter increased by $2.8 million and were $2.8 million during the quarter.

Income tax rate during the quarter was 28.7% (which was 30.7% in the prior year quarter).

Net cash from operating activities during the quarter was $91.8 million.

Free Cash Flow was $91.2 million.

Total Segment Profit in the first fiscal quarter increased by 23.2% or $32.7 million and was $173.9 million (which was $141.2 million in the prior year quarter).

Dividend

The company declared a dividend for the second quarter of its fiscal 2017 of $0.275 per share of Common Stock, payable on March 14, 2017 to all shareholders of record as of the close of business on February 21, 2017.

Share Repurchases

The company repurchased approximately 182,000 shares of common stock for $8.1 million

Expectations for Fiscal 2017

Range

Net sales

To increase by mid-single digits

Capex

To be between $30-$35 million

Income tax rate

To be between 29%-30%

Acquisition and integration costs

To be between $5million-$10 million

Net Cash from operating activities

Is expected to exceed by around $210 million

Free Cash Flow

Is expected to exceed by around $180 million

Gross margin rates

To improve by 50 to 100 basis points

SG&A as a percent of net sales

To be between 19%-20%



Focus

  • Productivity improvements
  • Execute on its strategic priorities
  • Innovation
  • Product performance



Conclusion

Energizer Holdings has a broad portfolio of brand battery products like batteries and charging systems, portable flashlights and lanterns. The flagship brands include Energizer EcoAdvanced, Energizer Ultimate Lithium and Energizer Recharge. It has an array of lighting products to offer to the consumers.

If a report submitted by Allied Market Research is to be believed, the global lithium-ion battery market is expected to generate revenue of $46.21 billion by 2022, with a CAGR of 10.8% during the forecast period (2016-2022). The electronics market contributes a large part of the revenue.

The company has a global footprint and competes in the U.S. and on a global basis. It has a lot of room to grow. It is making structural changes too. It is an interesting pick and is already moving higher. It is witnessing record revenues (an increase of 16.4% from the prior year quarter) in North America and Latin America. The company spun off its personal care products o forma company Edgewell Personal Care. The company is performing well and I think adding this company will reap shareholder returns.

Disclosure: I do not hold any position in the company

This article first appeared on GuruFocus.