Energizer (ENR) Q4 Earnings & Sales Beat Estimates, Rise Y/Y

Shares of Energizer Holdings, Inc. ENR jumped 7.6% during the trading hours on Nov 15, following the release of solid fourth-quarter fiscal 2022 results. Both the top and the bottom line surpassed the Zacks Consensus Estimate. Moreover, both metrics improved year over year.

Energizer exited fiscal 2022 on a solid note, generating full-year net sales, adjusted earnings per share and an adjusted EBITDA, in line with its outlook. It accomplished its seventh straight year of net sales growth on robust organic growth in both its operating segments.

ENR’s shares have plunged 15.9% in the past six months compared with the industry’s decline of 22%.

Q4 Metrics

Energizer’s adjusted earnings of 82 cents per share beat the Zacks Consensus Estimate of 76 cents and increased 3.8% from the year-ago fiscal quarter’s reported figure.

ENR reported net sales of $790.4 million, exceeding the Zacks Consensus Estimate of $774 million and growing 3.2% from the year-ago fiscal quarter’s reading. Organic sales moved up 7.4% in the quarter under review, benefiting from pricing in both battery and auto care leading to an organic increase of 13.3%. Higher pricing offset lower volume in the battery and auto care.

Segments in Detail

On Oct 1, 2021, Energizer changed its segments from the two geographies of 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 5.9% year over year to $639 million in fourth-quarter fiscal 2022 and beat the consensus mark of $626.8 million. Meanwhile, revenues in the Auto Care segment decreased 6.9% to $151.4 million and lagged the consensus mark of $153 million.

Margins

In the fiscal fourth quarter, Energizer’s adjusted gross margin contracted 150 basis points (bps) to 36.2%. This was mainly driven by increased operating expenses, comprising transportation, material and labor costs, and the ongoing inflationary trends. The operating inefficiencies weakened production volumes, and further hurt ENR’s performance. The margin decline was somewhat offset by higher prices.

Excluding costs related to restructuring, SG&A as a rate of sales was 15.1% compared with 14.3% recorded in the prior-year quarter. On a dollar basis, SG&A rose about 9% to $119.2 million due to increased IT spending related to digital transformation as well as rising compensation costs and recycling fees.

Adjusted EBITDA was $146 million, up 7.4% year over year owing to price increases across both segments and lower A&P spending, partly offset by elevated input costs, higher SG&A and currency headwinds.

Other Financial Details

As of Sep 30, 2022, Energizer’s cash and cash equivalents were $205.3 million, with long-term debt of $3,499.4 million and shareholders' equity of $130.6 million. Subsequent to the year-end, ENR paid down an additional $25 million of debt.

For the year ending Sep 30, 2022, this presently Zacks Rank #3 (Hold) player provided $1 million cash from operations. It paid out dividends of $84.9 million or $1.20 per share.

Outlook

In fiscal 2022, ENR delivered solid results on the back of pricing actions and sturdy operational execution. Management continues working on several initiatives to mitigate the impacts of the pandemic, including input cost inflation, and drive long-term growth. Such efforts built the profit recovery program Project Momentum, which includes an enterprise-wide restructuring component.

Under Project Momentum, management will leverage the foundation built in the first phase of fiscal 2022 transformation programs. It implemented various initiatives to recover operating margins, cash flow and organizational efficiency. Project Momentum aims to accomplish annualized pre-tax savings of around $80-$100 million, with nearly $30-$40 million of the amount to be recognized during fiscal 2023. The restructuring component is likely to deliver annualized pre-tax savings of about $65-$80 million of the overall savings and estimated one-time pre-tax costs of $40-$50 million in the next two years.

For fiscal 2023, Energizer projects organic revenues to grow in low-single digits on solid pricing actions, partly offset by category volume declines in the Battery and Auto Care segments. It expects low single-digit declines for reported revenues, including currency headwinds of roughly $90 million, based on the September 2022 rates.

Adjusted EBITDA is forecast in the $585-$615 million band, up 10% on a currency-neutral basis at the midpoint. Management envisions adjusted earnings per share of $3-$3.30, up nearly 12% on a currency-neutral basis at the midpoint. Currency headwinds are likely to hurt earnings to the tune of $27 million and 30 cents per share.

3 Better-Ranked Consumer Staples Stocks

Some better-ranked stocks are Lamb Weston LW, Albertsons Companies ACI and MGP Ingredients MGPI.

Lamb Weston, a renowned global manufacturer and distributor of value-added frozen potato products, currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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