Yahoo Finance Energizer (ENR) Gains on Strategic Focus, Robust Auto Care Unit
Energizer Holdings Inc. ENR is actively pursuing a series of strategic initiatives aimed at fostering sustainable growth and profitability. These initiatives are broad, covering everything from consumer engagement to pricing strategies, all designed to enhance brand loyalty and increase market share without sacrificing margins.
A key component of these strategies is the company's Project Momentum initiative, which focuses on cost-saving measures and operational efficiencies to boost margin expansion and long-term value creation.
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Let’s Dig Deeper
The Auto Care segment has emerged as a significant growth driver for Energizer, with revenues increasing 2.3% to $182.3 million in the second quarter of fiscal 2024. This segment experienced a remarkable 600-basis-point expansion in segmental profit. Growth in this segment is attributed to innovative product offerings, effective marketing strategies and strategic distribution channels.
Project Momentum is a cornerstone of Energizer's strategy, focusing on operational excellence and continuous improvement. To date, the initiative has exceeded its goals, contributing approximately $100 million in total savings, with $20 million realized in the fiscal second quarter alone. These savings have been crucial in enabling margin expansion and earnings growth. Energizer projects total savings from this program between $160 million and $180 million over three years, with expected savings for fiscal 2024 estimated at $55-$65 million.
In the second quarter of fiscal 2024, Energizer demonstrated a notable improvement in its financial metrics. The adjusted gross margin expanded by 260 basis points, reaching 40.5%. This increase was primarily driven by Project Momentum, which contributed savings of $11 million, along with lower input costs due to better commodities pricing and reduced ocean freight costs.
Debt Reduction Strategy Bodes Well
Energizer has implemented a robust debt reduction strategy, reflecting its commitment to strengthening its financial position and enhancing shareholder value. In the fiscal second quarter alone, the company paid down $60 million in debt. This ability to convert sales into cash efficiently has allowed Energizer to allocate more resources toward reducing debt while maintaining liquidity for strategic and operational needs.
Over the past seven quarters, Energizer has reduced its debt by $425 million and decreased its leverage by nearly one turn. The company’s debt structure remains strong, with a weighted average cost of debt at 4.6% and no significant debt maturities until 2027.
Challenges in the Battery Category
Despite these positive developments, Energizer's Batteries & Lights segment faced challenges, with revenues decreasing 4.9% year over year to $481 million in the fiscal second quarter. This segment also encountered competitive pressures from private labels, reflecting ongoing challenges despite broader efforts to stabilize and regain market strength.
This Zacks Rank #3 (Hold) company’s shares have gained 0.7% in the past three months compared with the industry’s growth of 4.8%.
Key Picks
Some better-ranked stocks are Freshpet Inc. FRPT, Vital Farms Inc. VITL and Ingredion Incorporated INGR.
Freshpet is a pet food company. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current fiscal-year earnings and sales indicates declines of 151.4% and 24.8%, respectively, from the year-ago reported figures. FRPT has a trailing four-quarter average earnings surprise of 118.2%.
Vital Farms offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Vital Farms's current financial-year earnings and sales indicates declines of 59.3% and 22.5%, respectively, from the year-ago reported figures. VITL has a trailing four-quarter average earnings surprise of 102.1%.
Ingredion serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries. It currently has a Zacks Rank of 2 (Buy). INGR has a trailing four-quarter average earnings surprise of 10.1%.
The Zacks Consensus Estimate for Ingredion’s current fiscal-year earnings indicates growth of 3.6% from the prior-year actuals.
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Energizer Holdings, Inc. (ENR) : Free Stock Analysis Report
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