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Energizer (ENR) Q3 Earnings & Sales Miss on Inflation Woes

Energizer Holdings, Inc. ENR reported third-quarter fiscal 2022 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. However, both metrics improved year over year.

Results gained from pricing actions, brand strength, investments in innovation, productivity, and digital transformation efforts. On the flip side, higher interest rates and rising prices affected consumer sentiment and influenced shopping habits.

ENR’s shares have plunged 21.1% year to date compared with the industry’s decline of 20.4%.

 

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Zacks Investment Research


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Q3 Metrics

Energizer’s adjusted earnings of 77 cents per share missed the Zacks Consensus Estimate of 78 cents. However, the metric increased nearly 4% from the year-ago quarter, driven by lower taxes, somewhat offset by rising interest expenses.

ENR reported net sales of $728 million, lagging the Zacks Consensus Estimate of $744 million. However, the top line grew 0.9% year over year. Organic sales moved up 3.8% in the quarter under review.

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 grew 3.7% year over year to $531.6 million in third-quarter fiscal 2022 but missed the consensus mark of $541.2 million. Meanwhile, revenues in the Auto Care segment decreased 6.1% to $196.4 million and lagged the consensus mark of $218.6 million.

Margins

In the fiscal third quarter, Energizer’s adjusted gross margin expanded 120 basis points (bps) to 40.4%. This was mainly driven by the favorable impacts of price increases in battery and auto care businesses, which somewhat offset higher operating costs, including transportation, material and labor, as well as ongoing inflation and unfavorable currency impacts.

Excluding costs related to the acquisition and integration, and exiting the Russia market, SG&A as a rate of sales was 16.3% compared with 14.8% recorded in the prior-year quarter. On a dollar basis, SG&A rose $12.3 million due to increased IT spending related to digital transformation as well as rising environmental costs related to a legacy facility and recycling fees.

Adjusted EBITDA was $145.5 million, up 0.8% year over year, owing to price increases in both segments and reduced A&P spending, which was partly offset by higher input costs and elevated SG&A.

Other Financial Details

As of Jun 30, 2022, Energizer’s cash and cash equivalents were $199.5 million, with long-term debt of $3,544.6 million and shareholders' equity of $499.7 million.

For the nine months ending Jun 30, 2022, the company used $106.2 million cash from continuing operations. It paid out dividends of $21.3 million or 30 cents per share.

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

Outlook

For fiscal 2022, management expects sales growth in the low-single digits and a gross margin of 37-38%, in sync with its initial outlook. It expects adjusted EBITDA in the lower end of the earlier mentioned $560-$590 million and adjusted earnings in the lower end of $3-$3.30.

For fiscal 2022, the unfavorable currency is expected to affect sales by $60-$65 million. Also, it is likely to incur $20 million due to the adverse impacts of the appreciating US dollar and its exit from the Russia market. This Zacks Rank #4 (Sell) player expects inflationary pressure to persist in the fiscal fourth quarter.

Stocks to Consider

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Sysco Corporation SYY, Chef Warehouse CHEF and Campbell Soup CPB.

Sysco, the marketer and distributor of food and related products, currently sports a Zacks Rank #1 (Strong Buy). SYY has a trailing two-quarter earnings surprise of 93.75%, on average. It has an expected long-term earnings growth rate of 11%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sysco’s current financial year’s sales and earnings per share suggests growth of 35.9% and 145.5%, respectively, from the year-ago reported numbers. The company has a trailing four-quarter earnings surprise of 3.7%, on average.

Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1. CHEF has a trailing four-quarter earnings surprise of 372.3%, on average.

The Zacks Consensus Estimate for Chef Warehouse’s current financial year’s sales and earnings per share suggests growth of 38.1% and 2540%, respectively, from the year-ago reported numbers.

Campbell Soup, the manufacturer and marketer of high-quality, branded convenience food products, currently carries a Zacks Rank #2 (Buy). It has an expected long-term earnings growth rate of 1.6%.

The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings per share suggests growth of 10.1% and 15.4%, respectively, from the year-ago reported numbers. CPB has a trailing two-quarter earnings surprise of 10.8%, on average.


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