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Energizer Raises Sales View on Higher Demand, Repays Debt

Zacks Equity Research
·3 min read

Energizer Holdings, Inc. ENR recently updated its guidance for the fourth quarter and fiscal 2020. The company has been seeing higher demand in North American batteries and continued growth in auto care. In fact, in the fourth-quarter-to-date, it saw continued increase in demand in each of the categories. As a result, net sales are now projected to rise 9.5%-11% for the fiscal year, including the estimated organic net sales increase of 1.5%-2.5%. For fiscal fourth quarter, the company expects organic net sales growth of 3%-6%. On its third-quarter earnings call, management had projected sales growth of 9%-10% with organic sales growth of 1%-1.5% for fiscal 2020.

Further, the company now forecasts incremental costs of products sold of roughly $23 million for fiscal with respect to COVID-19. It had previously projected incremental costs in cost of products sold between $15 million and $18 million. Management is incurring higher manufacturing and product costs to offer the best service to customers. It predicts the majority of the cost to abate in first-half fiscal 2021.

Meanwhile, management reiterated its fiscal 2020 view for adjusted earnings per share, adjusted EBITDA and adjusted free-cash flow. Adjusted earnings are envisioned to be $2.45-$2.55 per share. Management had earlier notified that currency headwinds are likely to mar the bottom line by roughly 16 cents. The outlook also includes the adverse impact of 19-22 cents resulting from incremental expenses and interest costs. Further, adjusted EBITDA is projected to be $575-$585 million, including negative impacts related to COVID-19. Moreover, adjusted free cash flow is estimated to be more than $300 million.

Simultaneously, management has announced that it repaid $200 million on its revolving-credit facility. This is due to the company’s robust free-cash flow generation. Adjusted free cash flow from continuing operations was $243.7 million at the end of third-quarter fiscal 2020.

Coming to Energizer’s price performance, this Zacks Rank #4 (Sell) stock has dipped 2.4% in the past three months compared with the industry’s 6.1% decline.

Key Stocks to Consider

Grocery Outlet Holdings (GO) has a long-term earnings growth rate of 14.3% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie’s Bargain Outlet Holdings (OLLI) has a long-term earnings growth rate of 21.6% and a Zacks Rank #2 (Buy).

Chewy (CHWY) delivered an earnings surprise of 12.9% in the past four quarters, on average. The company has a Zacks Rank #2.

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