Factors That Make Helen of Troy (HELE) an Attractive Bet Now
Helen of Troy Limited HELE appears well-positioned courtesy of growth endeavors, including consumer-centric innovation. The leading consumer products player is progressing well with Project Pegasus. Strength in the Leadership Brands bodes well.
The Zacks Rank #2 (Buy) company’s shares have increased 24.8% in the past three months against the industry’s decline of 7.1%. Let’s discuss in detail the factors driving HELE’s growth.
Project Pegasus Holds Promise
In the second quarter of fiscal 2023, Helen of Troy focused on developing a global restructuring plan, Project Pegasus. The plan aims to expand operating margins via initiatives designed to improve efficiency and reduce costs. Project Pegasus includes efforts to optimize the company’s brand portfolio, streamline and simplify the organization, grow the cost of goods-saving projects and improve the efficiency of the supply-chain network. The project aims to streamline indirect spending and improve cash flow and working capital.
As part of Project Pegasus, management expects to achieve annualized pre-tax operating profit improvements of $75-85 million, to be substantially generated by fiscal 2026-end. Management is on track to deliver $20 million of Project Pegasus savings during fiscal 2024.
Image Source: Zacks Investment Research
Strategic Efforts on Track
Helen of Troy is investing in key areas to continue driving growth. To this end, HELE invests in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capacity and direct-to-consumer channels.
The company's international business is also integral to its Phase II transformation plan. In fiscal 2023, HELE completed its new two million-square-foot state-of-the-art distribution facility in Tennessee. Management had earlier highlighted that it is diversifying the geographic footprint of global sourcing across China, Southeast Asia and Mexico. In fiscal 2024, management expects to incur capital asset expenditures in the range of $45-$50 million.
Strength in Leadership Brands
Helen of Troy has benefited from its focus on a solid Leadership Brand portfolio. Brands in this portfolio, including OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar and Osprey, are positioned to enhance market share. These brands account for a significant chunk of the company's sales, which generate solid margins and volumes.
In its first-quarter fiscal 2024 earnings call, management highlighted that its key leadership brands like OXO, Osprey, PUR and Curlsmith outperformed. Various leadership brands see improved share in specific categories across the United States.
Helen of Troy’s constant investments in the most productive brands have delivered robust results. In December 2021, Helen of Troy concluded the buyout of Osprey Packs, Inc., worth $414.7 million, which marks the company’s ninth Leadership Brand, yielding favorable results. The company acquired Drybar Products in January 2020.
All said, strength in the Leadership Brand portfolio and focus on strategic growth efforts will likely keep narrating HELE’s growth story.
Some Solid Staple Bets
MGP Ingredients MGPI, which produces and markets ingredients and distillery products, currently sports a Zacks Rank #1 (Strong Buy). MGPI has a trailing four-quarter earnings surprise of 18% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 5.8% and 10.4%, respectively, from the corresponding year-ago reported figures.
Flowers Foods FLO emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 2.3%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6% on average.
Utz Brands Inc. UTZ manufactures a diverse portfolio of salty snacks, carrying a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.7% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 12.3% on average.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
Helen of Troy Limited (HELE) : Free Stock Analysis Report
MGP Ingredients, Inc. (MGPI) : Free Stock Analysis Report
Utz Brands, Inc. (UTZ) : Free Stock Analysis Report
