Just a month ago, we first featured PBH as a value stock that
was worth looking into. In less than 30 days since that
report the stock has gained 20% in value, reported a strong quarter
and has built quite a bit of momentum behind it. The stock is
currently consolidating near its 52-week high and could be poised
for another leg up. Even with its recent run, Prestige Brands
is still fairly valued from an earnings perspective and is still a
Zacks Rank #1 Strong Buy.
As the market melts higher and investors look for stability
combined with growth, consumer staple stocks like PBH shouldn't be
ignored. Keep in mind that Prestige has a little more pep in its
step than a stock like Johnson & Johnson.
Company Description & Developments
Prestige Brands is a consumer products holding company that
markets, sells and distributes some of the most recognized brands
in the US and Canada as well as parts of Europe. They sell
dozens of brands, from Luden's cough drops and Tagamet to Comet
cleaner, Cloreseptic, Clear Eyes drops and more.
Its products are an integral part of everyday life and will
generally sustain well in stagnant or slow economies. While staples
may not take off in bull markets, they will generally
participate. Small Cap Value stocks like Prestige Brands will
offer a little more beta (volatility) than their larger peers like
Procter & Gamble and Johnson & Johnson.
Prestige just reported fiscal (2012) third quarter results on
February 9th and saw net income more than quadruple compared to the
same quarter one year ago. The company cited key acquisitions
and strong sales of some of their over-the-counter (OTC) health
Matthew M. Mannelly, CEO, noted, "We are pleased with our third
quarter results, which reflect the successful execution of our
stated strategy of core OTC growth combined with value-added
acquisitions. We registered strong growth from our nine core OTC
brands, resulting in solid market share gains across these
categories. Both the Little Remedies brand and the PediaCare brand,
which we acquired last year, experienced impressive revenue and
share gains for both the quarter and the nine month year-over-year
periods, despite a very soft cough/cold season. In addition, our
diversified portfolio of OTC brands and platforms helped offset the
headwinds of a tough cough/cold season."
Financial Profile & Earnings
Prestige Brands is a small-cap ($681 million) company that is
trading at about 15.6 times trailing earnings (P/E). Looking
forward, Zacks Consensus Estimates are calling for that number to
drop closer to 13.5, given no change in price over the next year.
Prestige Brands became a Zacks Rank #1 Strong Buy on January
17th, at which time it was trading at $11.25.
They reported net income of $9.5 million, or $0.19 per diluted
share for Q32012, 336.6% higher than the prior year's comparable
quarter of $2.2 million, or $0.04 per diluted share. The holding
company reported a quarterly sales increase of 2% at their last
earnings report. Annual sales were up 17.45% compared to
Q32011. To date, PBH has total sales of roughly $333.72
million. Prestige is expected to earn $0.96 per share in
FY2012 according to the Zacks Consensus Estimate.
Excluding the costs mentioned above in each of the respective
periods, net income for the current third fiscal quarter would have
been $12.5 million, or EPS of $0.25, compared to $10.3 million in
the prior year's comparable quarter of EPS of $0.21. Net income for
the first nine months of fiscal 2012 was $37.2 million, or 63.2%
higher than the prior year's comparable period of $22.8
The company also completed the acquisition of fifteen of the
seventeen OTC brands it agreed to purchase from GlaxoSmithKline (
). The acquisition of the remaining two brands from GSK is expected
to be completed during the first half of the year.
The CEO said, "Outlook for Q4 is one of cautious optimism given the
challenging economic and retail environment, as well as the overall
incident level of the cough/cold season to date. The GSK
acquisition is expected to add approximately $30 million to our
fourth quarter revenue and be neutral to EPS, excluding
transaction-related and integration costs."
It seems that Prestige is growing and improving profitability
despite a lackluster economic landscape. They did see sales
growth of 3.2% in their 5 core products and expect growth to
continue albeit cautiously in the coming quarter.
Market Performance & Technicals
Momentum has really become apparent since the stock broke out of
its sideways channel in December. Interestingly enough, this
pattern is almost a repeat of what happened in mid-2010. When
the stock emerged out of the channel in September of 2010, the
stock ran from about $8.00 to $12.00 (50%) within the course of
A repeat of that action could put the stock up around the
$16-$18 level from here.
Depending on the evolution of consumer strength (and health)
here in the US, that rally could be possible. PBH is firmly
above its 50- and 200-day moving averages of $11.66 and $11.14
respectively. You can look for that area to be support from
here. Prestige should also find a little sticky support at
the $13 level.
PBH has exceeded the S&P 500's performance by over 20% in the
past year, 35% over the past 12 weeks and almost 12% just over the
last month. With a beta of 1.5, PBH will generally move
with the major indices and then some…
PRESTIGE BRANDS (
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is
also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
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