Energizer Holdings Inc. (ENR): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Energizer reported mixed second-quarter fiscal 2014. Although earnings per share beat the Zacks Consensus Estimate, revenues missed the same. Quarter results were negatively impacted by unfavorable global currencies, pricing controls and import restrictions in certain Latin American countries. However, management's revenue guidance for the rest of the year remains weak. The expected decline in Household Product volume, unfavorable foreign exchange and increasing competition are the near-term headwinds. Moreover, continued brand investment will hurt profitability. However, we believe that product innovations, prudent product mix, strong sales from the newly acquired brands and restructuring initiatives will positively impact second-half 2014 results. The proposed spin-off is a positive for investors in the long run. Thus, we maintain our Neutral recommendation and set a price target of $120.00.

Overview:

Headquartered in St. Louis, MO and founded in 1999, Energizer Holdings Inc. (ENR) is one of the largest manufacturers and marketers of batteries, lighting and personal care products in the wet shave, skin care, feminine care and infant care categories. Energizer Holdings was spun off from Ralston Purina Company in 2000.

Energizer's products are marketed and sold globally in more than 160 countries through direct sales personnel, mass merchandisers, distributors and wholesalers. The company's two largest categories by revenues are battery products and wet shave.

Energizer earned revenues of $4.47 billion in fiscal 2013. The company reports revenues under two segments: Household Products and Personal Care Products. Energizer recently announced its intention to separate the two divisions into two independent, publicly traded companies. It has been planned as a tax-free spin-off to the company's shareholders and is expected to be completed in the second half of fiscal 2015.

Personal Care Products contributed 54.8% of revenues in fiscal 2013. Through this segment, Energizer offers wet shaving products, skin care products, feminine care products and infant care products.

Household Products contributed 45.2% of revenues in fiscal 2013. Under this segment, the company offers flashlights, lanterns and other battery-powered lighting products for home, work and outdoors. The company's battery business produces alkaline, lithium, carbon-zinc and rechargeable batteries. Energizer's lithium batteries are manufactured for non-consumer industrial applications and are used in cameras, camcorders, memory backup, CD players and portable computers.

Energizer generates 50.5% of its revenues from the United Sates while the remaining 49.5% comes from international operations. Energizer derives a significant amount of revenues from a relatively small number of retail customers. In fiscal 2013, Wal-Mart Stores and its subsidiaries accounted for approximately 20.0% of Energizer's sales.

Energizer operates in a highly competitive market, both in the Household and Personal Care segments. In the Household segment, the company faces competition from Duracell (a Proctor & Gamble subsidiary), Spectrum Brands and Panasonic. Energizer's principal competitors in the Personal Care business worldwide are Procter & Gamble, the BIC Group, Kimberly-Clark, Merck & Co. and Johnson & Johnson.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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