Energizer (ENR) Down 2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Energizer Holdings (ENR). Shares have lost about 2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Energizer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Energizer Beats on Q2 Earnings, Raises FY22 Sales View

Energizer reported second-quarter fiscal 2022 results, wherein the top and the bottom line surpassed the Zacks Consensus Estimate. However, sales were flat and earnings decreased on a year-over-year basis. Solid pricing execution across the brands and higher organic growth in auto care business aided sales. Also, robust pricing actions and supply-chain performances somewhat offset the inflationary cost pressures.

Q2 Metrics

Energizer’s adjusted earnings of 47 cents per share surpassed the Zacks Consensus Estimate of 35 cents but decreased nearly 39% from the year-ago quarter’s level. The bottom line decrease was due to elevated input expenses.

ENR reported net sales of $685.4 million, beating the Zacks Consensus Estimate of $644 million. The top line was almost flat on a year-over-year basis. Organic sales inched up 1.3% in the quarter under review. Pricing was executed in the battery and auto care businesses, boosting an organic increase of nearly 5%. Also, new distribution in the battery and auto care, predominantly in the International markets, contributed 1% to organic growth.

Energizer exited the Russian market in the reported quarter, dipping 0.5% sales year over year.

Segments in Detail

On Oct 1, 2021, Energizer changed its segments from two geographies — Americas and International — to two reporting units, namely Battery & Lights and Auto Care. The move followed the acquisition of Spectrum Brands’ battery and auto care units in the first quarter of fiscal 2022.

Energizer’s Batteries & Lights segment’s revenues declined 4.9% year over year to $516.5 million in second-quarter fiscal 2022, while revenues in the Auto Care segment increased 18.8% to $168.9 million.

Margins

In the fiscal second quarter, Energizer’s adjusted gross margin contracted 560 basis points (bps) to 34.9%. The downside was caused by elevated operating costs like transportation, material and labor, partly offsetting the impact of executed price increases in battery and auto care.

Excluding costs related to the acquisition and integration, and exiting the Russian market, SG&A as a rate of sales was 17.2% compared with 16.7% recorded in the prior-year quarter. On a dollar basis, SG&A rose $3.5 million due to increased IT spend related to the digital transformation.

Adjusted EBITDA was $114.6 million, down 22.4% year over year.

Other Financial Details

As of Mar 31, 2022, Energizer’s cash and cash equivalents were $213.2 million, with a long-term debt of $3,592.6 million and shareholders' equity of $461.3 million. For the six months ending Mar 31, 2022, the company used $108.7 million cash from continuing operations. In the reported quarter, the mandatory convertible preferred stock converted to nearly 4,700,000 shares. It paid out dividends of $22.3 million or 30 cents per share.

Outlook

Management updated view for fiscal 2022. It expects sales to increase in low-single digits from the prior guided view of flat with the year-ago quarter’s reported figure.

However, management stated that the operating landscape remains volatile but reiterated its earnings view on pricing actions and cost management. For fiscal 2022, Energizer continues to expect adjusted earnings per share of $3.00-$3.30 and an adjusted EBITDA of $560-$590 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Energizer has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Energizer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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