Energizer Holdings Inc. (
reported third quarter 2012 non-GAAP earnings of $1.18, which
missed the Zacks Consensus Estimate by 14 cents. Earnings plunged
14.0% year over year primarily due to weak revenue growth in the
Total revenue declined 9.0% year over year to $1.12 billion and
was well short of the Zacks Consensus Estimate of $1.21 billion.
The decline was primarily due to weak organic sales (down 6.6% year
over year) and unfavorable foreign exchange (negative impact of
2.3%). Revenue growth suffered from weakness across all the
Personal Care (60% of total revenue) decreased 7.1% year over
year to $673.5 million, primarily due to lackluster organic sales
(down 5.1% year over year). The decline was primarily due to
sluggish sales in Wet Shave (down 8.0% year over year), Skin Care
(down 6.0% year over year) and Infant Care (down 12% year over
year) product segments.
Household Products (40% of total revenue) declined 11.5% year
over year to $450.6 million, primarily due to unfavorable foreign
currency (negative impact of 2.8%) and sluggish organic sales (down
8.7% year over year) in the quarter. Organic sales decline was due
to a significant market share loss at one customer, sluggish
household battery market (volumes down 5.0%) and inventory
Gross profit decreased 7.7% from the prior-year quarter to
$528.8 million. Gross margin expanded 60 basis points ("bps") on a
year-over-year basis to 47.0%. Gross margin was positively impacted
by favorable product mix and stringent cost control.
Spending on advertising and promotion (A&P) was down 9.2%
year over year to $141.8 million. Selling, general and
administrative expenses (SG&A) increased 8.6% year over year to
$233.8 million. Research and development expenses (R&D) went up
2.9% from the prior-year quarter to $28.6 million.
Operating profit slumped 28.3% year over year to $124.6 million.
Operating margin decreased 300 bps to 11.1%, due to higher
operating expenses. Net income plunged 19.5% year over year to
$77.7 million, primarily due to lower operating income base and
higher interest expense (up 14.1% year over year) in the reported
Energizer repurchased 1.1 million shares for approximately $83
million in the third quarter.
Management reiterated its earlier guidance for fiscal 2012, with
earnings expected to remain within the range of $6.00 to $6.20 per
share. A lower advertising and promotion expense is expected to
fully offset continuing weakness in the household product segment
for the remainder of the year.
For the fourth quarter, management expects organic sales to
remain flat in the personal care segment. In the household product
segment, organic sales are expected to decline in the low
single-digit range due to intensifying competition and lower
Energizer's fourth quarter guidance fails to impress us. We
believe that sluggish domestic battery market, unfavorable foreign
exchange and increasing competition from companies such as
Panasonic Corp. (
Procter & Gamble Co. (
will hurt profitability in the near term.
However, lower advertising & promotion expense will offset
some of these headwinds going forward. We believe Energizer's
diversified product portfolio, innovative product pipeline and
loyal customer base will drive top-line growth going forward.
Moreover, the ongoing restructuring efforts (net working capital
reduction project) will expand margins going forward.
Thus, we remain Neutral over the long term (6-12 months).
Energizer currently holds a Zacks #3 Rank, implying a short-term
Hold rating on the stock.
ENERGIZER HLDGS (ENR): Free Stock Analysis
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PROCTER & GAMBL (PG): Free Stock Analysis
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