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Energizer (ENR) Q2 Earnings Beat Estimates, Sales Dip Y/Y

Energizer Holdings, Inc. ENR reported second-quarter fiscal 2024 results, wherein its bottom line surpassed the Zacks Consensus Estimate. Its adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate of 67 cents. Also, the bottom line increased 13% from the year-ago quarter’s reported figure.

This current Zacks Rank #2 (Buy) company reported net sales of $663.3 million, which were almost in line with the Zacks Consensus Estimate but fell 3% from the year-ago quarter’s reading. Organic sales dipped 2.7%. We expected organic sales to drop 2.4% . Pricing fell 3.3% due to planned strategic pricing and promotional investments, partly offsetting volume growth of 0.6% backed by Auto Care distribution gains.

Segments in Detail

Revenues of Energizer's Batteries & Lights segment dropped 4.9% year over year to $481 million, in line with our anticipated rate of decline. We note that segmental profit slipped 0.9% to $113.5 million.

Energizer Holdings, Inc. Price, Consensus and EPS Surprise

 

Energizer Holdings, Inc. Price, Consensus and EPS Surprise
Energizer Holdings, Inc. Price, Consensus and EPS Surprise

Energizer Holdings, Inc. price-consensus-eps-surprise-chart | Energizer Holdings, Inc. Quote

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Revenues in the Auto Care segment rose 2.3% to $182.3 million from the year-ago period, surpassing our projected growth rate of 2%.  Segmental profit increased 37.4% year over year to $40.4 million.

Margins

Energizer’s adjusted gross margin expanded 100 basis points to 40.5%, driven primarily by the Project Momentum savings of $11 million and lower input costs with better commodities pricing and reduced ocean freight. However, this positive effect was partly offset by strategic pricing and promotional investments. We expected a gross margin expansion of 150 basis points.

Excluding restructuring costs, adjusted SG&A expenses fell 3.3% year over year to $113.9 million. Adjusted EBITDA was $142.5 million, up 7.2% year over year. We had expected SG&A expenses to dip 0.1% to $116.4 million and adjusted EBITDA to jump 1.3% to $141.2 million.

Other Financial Details

As of Mar 31, 2024, Energizer’s cash and cash equivalents were $158.1 million, with long-term debt of $3.2 billion and shareholders' equity of $191.3 million. In the fiscal second quarter, ENR paid down $60 million of debt. At the end of the quarter, the company’s net debt to adjusted EBITDA was 5.2 times. Management paid dividends of $44 million for the first half of the year.

The operating cash flow for the fiscal first half was $214.9 million and the free cash flow was $162.9 million.

Outlook

For fiscal 2024, Energizer expects organic revenues between flat and a low-single-digit decline. The company anticipates its adjusted EBITDA between $600 million and $620 million, with adjusted earnings per share between $3.10 and $3.30. It predicts adjusted gross margin expansion of more than 100 basis points.

For the fiscal third quarter, organic revenues are expected to rise 1%, and adjusted earnings per share are anticipated to be in the range of 62-68 cents, up 20% at the midpoint. It anticipates the gross margin to improve about 150 bps year over year.

Project Momentum is on track with total savings likely to be in the band of $160-$180 million over the life of its program. Cash costs to accomplish savings are anticipated to be in the range of $140-$150 million. For fiscal 2024, expected savings from Project Momentum are pegged at $55-$65 million, with one-time cash costs in the range of $60-$70 million.

Shares of ENR have gained 2.6% in the past three months compared with the industry’s 6.5% growth.

Other Stocks to Consider

We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Utz Brands UTZ, Celsius Holdings CELH and Diageo DEO.

Utz Brands, which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 2.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 19.3% from the year-ago reported numbers.

Celsius Holdings, which offers functional drinks and liquid supplements, currently carries a Zacks Rank of 2. CELH has a trailing four-quarter earnings surprise of 67.4%, on average.

The consensus estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 41.6% each from the year-ago reported figures.

Diageo currently carries a Zacks Rank of 2. DEO shares have gained 3.4% in the past three months.

The Zacks Consensus Estimate for Diageo’s current financial-year sales suggests growth of 11% from the year-ago period's reported figures. The consensus mark for the company’s earnings per share indicates a decline of 8.2% from the year-ago quarter’s actual.

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