Energizer Holdings - Value
All 12 earnings estimates covering Energizer Holdings Inc. ( ENR ) for the current fiscal year have been revised higher in the past 30 days, following a solid fiscal fourth quarter that included a positive earnings surprise of more than 13%. Despite the strong performance, this Zacks #1 Rank (Strong Buy) manufacturer of personal care and consumer goods remains undervalued with a forward price-to-earnings (P/E) multiple of 11.6 and a price-to-book (P/B) multiple of 2.5.
Energizer's EPS Beats, Revs In Line
On November 8, Energizer Holdings reported fiscal fourth quarter earnings of $1.76 per share, which comfortably surpassed the Zacks Consensus Estimate by 13.6% and the year-ago quarter by 60%.
Total revenue declined 4.6% year over year to $1.14 billion, but was in line with the Zacks Consensus Estimate. The decline was primarily due to weak organic sales (down 1.5% year over year) and unfavorable foreign exchange (negative impact of 3.1%).
Gross margin expanded 60 basis points ("bps") on a year-over-year basis to 46.1%. Operating margin improved to 19.4% from 16.1%, primarily due to lower operating expenses.
Energizer Holdings expects fiscal 2013 adjusted earnings per share between $6.75 and $7.00. Management expects fiscal 2013 sales to grow in the low-single digits, aided by mid-single digit sales growth in the Personal Care segment.
Energizer Holdings announced a restructuring program to be completed over the next two years. It is expected to yield pre-tax cost savings of $200 million on an annualized basis and constitutes 75% of the total cost saving initiatives. Management expects this initiative to improve profitability with the remainder being put back into the business to promote long-term growth.
Earnings Estimates Moving Up
The Zacks Consensus Estimate for 2013 has advanced 7.0% to $6.81 in the past 30 days, as all 12 estimates were revised upward. The Zacks Consensus Estimate for 2014 improved 5% in that time to $7.56, thanks to upward revisions from 9 of 12 estimates.
Valuation Continues to Impress
In addition to low P/E and P/B multiples, the stock looks attractive with respect to the price-to-sales (P/S) multiple of 1.07, compared with industry average of 1.19. A P/E below 15.0, a P/S ratio less than 1.0 and a P/B ratio under 3.0 generally suggests a value stock.
Moreover, Energizer Holdings' Return on Equity (ROE) of 19.1%, Return on Investment (ROI) of 6.1% and Return on Asset (ROA) of 10.0% are also better than the industry averages.
The chart below indicates an uptrend in 2013 and 2014 earnings estimates, which should encourage investors as the stock is likely to follow the trend. Also, since shares have not significantly reacted to positive estimate changes yet, the upside appears likely in the next few months.
Energizer Holdings is one of the largest manufacturers and marketers of batteries, lighting and personal care products. The company offers flashlights and lanterns and other battery-powered lighting products for home, work and the outdoors. Energizer Holdings also sells wet shaving products and skin care products for men and women. The company has market capital of $4.90 billion.
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