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Things to Know Ahead of Spectrum Brands' (SPB) Q3 Earnings

Zacks Equity Research

Spectrum Brands Holdings, Inc. SPB is scheduled to report third-quarter fiscal 2019 numbers on Aug 7, before the opening bell. The company lagged the earnings estimates in three of the trailing four quarters. In the last reported quarter, it witnessed a negative earnings surprise of 31.6%. Let’s see how the company is positioned ahead of the upcoming quarterly results.

Earnings and Revenue Estimates

The Zacks Consensus Estimate for the fiscal third quarter is pegged at $1.27, indicating a decline of 27.8% from the year-ago period. The consensus mark has moved south by 2 cents over the past 30 days.

The consensus mark for revenues is pegged at $1,016 million, suggesting a growth of 7.5% from the year-ago quarter’s figure.

Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise

Spectrum Brands Holdings Inc. Price, Consensus and EPS Surprise

Spectrum Brands Holdings Inc. price-consensus-eps-surprise-chart | Spectrum Brands Holdings Inc. Quote

Factors Likely to Drive Q3

Spectrum Brands’ strategic efforts to manage business portfolio via mergers, acquisitions and divestitures are encouraging and are expected to drive third-quarter results. Evidently, the company announced a five-year partnership with Manchester United plc, following which its Remington personal care brand will be the Manchester Football Club’s foremost official Electrical Styling Partner. Backed by this deal, Spectrum Brands is expected to strengthen its Home & Personal Care segment along with product innovation and marketing efforts.

In January 2019, it completed the divestitures of its Global Auto Care business as well as Global Battery and Lighting Businesses. Notably, management remains on track to execute actions like debt reduction to improve capital structure in fiscal 2019. Such well-chalked plans are likely to boost revenues in the to-be-reported quarter.

Headwinds Likely to Dampen Q3

Lower volumes, input cost inflation, unfavorable product mix and operating expense deleverage have been hurting the company’s EBITDA. In the fiscal second quarter, bottom line declined due to higher operating expenses stemming from increased stock-based compensation and interest expenses from assumed HRG debt. Going ahead, management expects increased spending on marketing and advertising. Also, product developments and innovations are expected to persistently hurt margins. Adverse foreign currency translations have been weighing on the company’s performance. These factors might hurt its margins and profitability in the impending quarter.

What Our Model Says

Our proven model does not conclusively show that Spectrum Brands is likely to beat bottom-line estimates in third-quarter fiscal 2019. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Spectrum Brands carries a Zacks Rank #3, an Earnings ESP of -2.36% makes surprise prediction difficult.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Rent-A-Center, Inc. RCII has an Earnings ESP of +3.88% and a Zacks Rank #2.

Weight Watchers International, Inc. WW has an Earnings ESP of +3.68% and a Zacks Rank #3.

Energizer Holdings, Inc. ENR has an Earnings ESP of +1.79% and a Zacks Rank #3.

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