Spectrum Brands Holdings Inc.
) had a good first half to fiscal 2012 with earnings per share
beating the Zacks Consensus Estimate in the first two quarters.
Shares of this Zacks #1 Rank (Strong Buy) are currently near the
52-week high and have grown about 17% year-to-date.
This consumer goods company continues to gain momentum by
capitalizing on new product developments, acquiring and integrating
new brands, retail distribution and share gains, select pricing
actions and cost containment efforts.
Fiscal 2012 Second Quarter
On May 9, Spectrum Brands reported fiscal second-quarter earnings
per share of 34 cents, marking a positive surprise of 13.3% over
the Zacks Consensus Estimate. This compared favorably with 23 cents
in the prior-year quarter. Spectrum Brands' quarterly performance
mainly rode on solid contributions from three of its operating
segments, along with stringent cost containment initiatives.
Net sales of $746.3 million comfortably surpassed the Zacks
Consensus Estimate of $735.0 million and grew 7.6% year over year,
reflecting robust sales growth across Global Batteries &
Appliances (up 4.5%), Global Pet Supplies (up 8.5%) and Home and
Garden (up 21.5%). Furthermore, the company's acquisition of Black
Flag/TAT brands and the FURminator pet grooming business in late
2011 contributed positively to the quarter's revenues.
On the back of robust sales and strong expense controls, operating
income surged 17.2% to $55.2 million, whereas operating margin
expanded 60 basis points to 7.4%.
Following the impressive second quarter results, the company
reaffirmed its fiscal 2012 forecast for sales growth, projecting a
rise at or above the GDP rate. Additionally, the company expects
positive net earnings in fiscal 2012 against a net loss in fiscal
Spectrum Brands is in the midst of a major cost cutting process
while it looks for opportunities to expand its brand portfolio. The
company is also working well with its game changing Spectrum Value
Model to deliver genuine value to customers at lower prices
compared to its peers. Spectrum Brands is focused on strengthening
its balance sheet through refinement of its capital structure while
also enhancing its financial flexibility to boost shareholder
value. The company targets free cash flow of at least $200 million
by fiscal year-end 2012.
Estimates to the Upside
In the past 30 days, the Zacks Consensus Estimate for 2012 rose
3.6% to $2.56 per share on the back of upward revisions in both
estimates, which reflects year-over-year growth of 39.9% on
reported fiscal 2011 earnings of $1.83.
Valuation Looks Promising
Spectrum Brands currently trades at a forward P/E of 12.9x,
reflecting a 3% discount to the peer group average of 13.3x.
However, on a price-to-book basis, the shares trade with a 30.8%
premium at 1.7x. The company's compelling fundamentals are well
supported by its long-term estimated EPS growth rate of 10%.
With respect to return on equity (ROE), the stock looks attractive.
It has a trailing 12-month ROE of 11.1%, which is above its peer
group average of 10.2%. This implies that the company reinvests its
earnings more efficiently than its peer group.
Charts Hint at Strength
Shares of Spectrum Brands traded in the range of $28.16 to $31.71
between January 3 and March 20, 2012. Breaking out of this near
three-month range, the company began moving closer its 52-week high
on March 21, 2012. Moreover, the stock has been consistently
trading above its 200-day moving average of $30.32 since January 9,
Volume is fairly strong, averaging roughly 202K daily. Spectrum
Brands, which competes with Procter & Gamble Co. (
) and Energizer Holdings Inc. (
), has outperformed the S&P 500 over the last three months. The
year-to-date return for the stock is 17.0% compared with the
S&P 500 return of 1.6%.
Headquartered in Madison, Wisconsin, Spectrum Brands sells
batteries, shaving and grooming products, personal care products,
specialty pet supplies, lawn and garden and home pest control
products, personal insect repellents and portable lighting, through
various trade channels under its renowned brands. The company's
brand portfolio mainly includes Rayovac, Remington, Varta, George
Foreman, Black & Decker, Toastmaster, Farberware, Tetra,
Marineland, Nature's Miracle, Dingo, 8-in-1, Littermaid,
FURminator, Spectracide, Russell Hobbs, Cutter, Repel, Hot Shot,
Black Flag, and TAT brands. The company has a current market cap of
SPECTRUM BRANDS (SPB): Free Stock Analysis
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