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Energizer (ENR) Q3 Earnings Beat Estimate, Organic Sales Up Y/Y
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Energizer Holdings, Inc. (ENR - Free Report) reported third-quarter fiscal 2024 results, wherein its top line lagged the Zacks Consensus Estimates but the bottom line surpassed the same. However, both metrics increased year over year.
Energizer’s strategic initiatives include Project Momentum for margin recovery, cash flow restoration and debt reduction. The company focuses on market expansion by leveraging its global platform, investing in innovation to drive growth, enhancing digital commerce capabilities and improving distribution by optimizing customer placement and pursuing new opportunities.
Energizer Holdings, Inc. Price, Consensus and EPS Surprise
Energizer’s adjusted earnings of 79 cents per share beat the Zacks Consensus Estimate of 67 cents per share. Also, the bottom line increased 46.3% from the year-ago quarter’s reported figure.
The company reported net sales of $701.4 million, which lagged the Zacks Consensus Estimate of $705 million but increased 0.3% from the year-ago quarter’s reading. Organic sales increased 1.2%, which is in line with our anticipated rate of increase for the fiscal third quarter.
The volume increase in Battery & Lights contributed 3.6% organic growth attributed to improved category trends and expanded global distribution. Similarly, the Auto Care segment experienced a 1% organic growth, fueled by favorable refrigerant sales resulting from warmer weather and gains in international distribution.
However, these increases were partially offset by a 3.4% decline in pricing, primarily within Battery & Lights, which was the result of planned strategic pricing and promotional investments in the fiscal third quarter.
Image Source: Zacks Investment Research
Segments in Detail
Revenues of Energizer's Batteries & Lights segment dropped 0.4% year over year to $509.1 million. We note that segmental profit increased 6.2% to $129.4 million.
Meanwhile, revenues in the Auto Care segment rose 2.2% to $192.3 million from the year-ago period, surpassing our projected 1.5% growth in segmental revenues. Also, we note that segmental profit increased sharply 54% to $26.8 million.
Margins
In the fiscal third quarter, Energizer’s adjusted gross margin expanded 270 basis points to 41.5%. The improvement in adjusted gross margin was primarily due to two factors. First, Project Momentum initiatives generated savings of approximately $14 million in the quarter. Second, there was a reduction in input costs, including better commodity and material pricing and lower ocean freight expenses. However, these gains were partially offset by the planned strategic pricing and promotional investments. We expected a gross margin expansion of 150 basis points.
Excluding restructuring costs, adjusted SG&A expenses increased 4.5% year over year to $118.4 million. This increase was driven by higher labor and benefit costs, increased travel expenses, greater depreciation related to digital transformation initiatives and rising legal fees. However, this increase was partially mitigated by approximately $7 million in savings from Project Momentum.
Adjusted SG&A costs, as a rate of net sales, came in at 16.9% compared with the 16.2% recorded in the prior-year quarter. We had expected SG&A expenses, as a percentage of net sales, to be 16.3% in the quarter under review.
Adjusted EBITDA came in at $149.7 million, up 18.1% year over year, whereas the adjusted EBITDA margin increased 320 basis points to 21.3%.
Other Financial Details
As of Jun 30, 2024, Energizer’s cash and cash equivalents were $146.7 million, with long-term debt of $3.21 billion and shareholders' equity of $123.4 million. As of the fiscal third quarter, ENR paid down $150 million of debt. At the end of the quarter, the company’s net debt to adjusted EBITDA was 5x times. The operating cash flow as of the fiscal third quarter was $260.7 million and the free cash flow was $195.1 million.
Outlook
For fiscal 2024, Energizer expects organic revenues to be down roughly 2%. The company anticipates its adjusted EBITDA between $610 million and $620 million, with adjusted earnings per share between $3.20 and $3.30. It anticipates the gross margin to improve more than 150 bps year over year. The metric increased more than 100 basis points from its previous estimation, primarily due to incremental project momentum savings and improved input costs.
For the fiscal fourth quarter, organic revenues are expected to be flat and adjusted earnings per share are anticipated to be in the range of $1.10 to $1.20.
Project Momentum is on track with total savings likely to be in the band of $180-$200 million over the life of its program. Cash costs to accomplish savings are anticipated to be in the range of $150-$170 million. For fiscal 2024, expected savings from Project Momentum are pegged at $80-$90 million, with one-time cash costs in the range of $70-$80 million.
Shares of this Zacks Rank #4 (Sell) company have declined 7.8% in the past six months against the industry’s growth of 6.2%.
Some Better-Ranked Bets
Here, we have highlighted three better-ranked stocks, namely Vital Farms Inc. (VITL - Free Report) , Treehouse Foods, Inc. (THS - Free Report) and Kimberly-Clark Corporation (KMB - Free Report) .
VITL has a trailing four-quarter earnings surprise of 102.1%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year’s earnings and sales indicates growth of 66.1% and 24.9%, respectively, from the year-ago reported figures.
Treehouse Foods is a manufacturer of packaged foods and beverages. It presently carries a Zacks Rank #1. THS has a trailing four-quarter average earnings surprise of 25.1%.
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year earnings and sales indicates decline of 8.5% and 1.6%, respectively, from the year-ago reported figures.
Kimberly-Clark is principally engaged in the manufacture and marketing of a wide range of consumer products. It has a Zacks Rank of 2 (Buy) at present.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial-year earnings indicates growth of 9.7% from the year-ago reported figure. KMB has a trailing four-quarter average earnings surprise of 12.6%.
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Energizer (ENR) Q3 Earnings Beat Estimate, Organic Sales Up Y/Y
Energizer Holdings, Inc. (ENR - Free Report) reported third-quarter fiscal 2024 results, wherein its top line lagged the Zacks Consensus Estimates but the bottom line surpassed the same. However, both metrics increased year over year.
Energizer’s strategic initiatives include Project Momentum for margin recovery, cash flow restoration and debt reduction. The company focuses on market expansion by leveraging its global platform, investing in innovation to drive growth, enhancing digital commerce capabilities and improving distribution by optimizing customer placement and pursuing new opportunities.
Energizer Holdings, Inc. Price, Consensus and EPS Surprise
Energizer Holdings, Inc. price-consensus-eps-surprise-chart | Energizer Holdings, Inc. Quote
Q3 Metrics
Energizer’s adjusted earnings of 79 cents per share beat the Zacks Consensus Estimate of 67 cents per share. Also, the bottom line increased 46.3% from the year-ago quarter’s reported figure.
The company reported net sales of $701.4 million, which lagged the Zacks Consensus Estimate of $705 million but increased 0.3% from the year-ago quarter’s reading. Organic sales increased 1.2%, which is in line with our anticipated rate of increase for the fiscal third quarter.
The volume increase in Battery & Lights contributed 3.6% organic growth attributed to improved category trends and expanded global distribution. Similarly, the Auto Care segment experienced a 1% organic growth, fueled by favorable refrigerant sales resulting from warmer weather and gains in international distribution.
However, these increases were partially offset by a 3.4% decline in pricing, primarily within Battery & Lights, which was the result of planned strategic pricing and promotional investments in the fiscal third quarter.
Image Source: Zacks Investment Research
Segments in Detail
Revenues of Energizer's Batteries & Lights segment dropped 0.4% year over year to $509.1 million. We note that segmental profit increased 6.2% to $129.4 million.
Meanwhile, revenues in the Auto Care segment rose 2.2% to $192.3 million from the year-ago period, surpassing our projected 1.5% growth in segmental revenues. Also, we note that segmental profit increased sharply 54% to $26.8 million.
Margins
In the fiscal third quarter, Energizer’s adjusted gross margin expanded 270 basis points to 41.5%. The improvement in adjusted gross margin was primarily due to two factors. First, Project Momentum initiatives generated savings of approximately $14 million in the quarter. Second, there was a reduction in input costs, including better commodity and material pricing and lower ocean freight expenses. However, these gains were partially offset by the planned strategic pricing and promotional investments. We expected a gross margin expansion of 150 basis points.
Excluding restructuring costs, adjusted SG&A expenses increased 4.5% year over year to $118.4 million. This increase was driven by higher labor and benefit costs, increased travel expenses, greater depreciation related to digital transformation initiatives and rising legal fees. However, this increase was partially mitigated by approximately $7 million in savings from Project Momentum.
Adjusted SG&A costs, as a rate of net sales, came in at 16.9% compared with the 16.2% recorded in the prior-year quarter. We had expected SG&A expenses, as a percentage of net sales, to be 16.3% in the quarter under review.
Adjusted EBITDA came in at $149.7 million, up 18.1% year over year, whereas the adjusted EBITDA margin increased 320 basis points to 21.3%.
Other Financial Details
As of Jun 30, 2024, Energizer’s cash and cash equivalents were $146.7 million, with long-term debt of $3.21 billion and shareholders' equity of $123.4 million. As of the fiscal third quarter, ENR paid down $150 million of debt. At the end of the quarter, the company’s net debt to adjusted EBITDA was 5x times. The operating cash flow as of the fiscal third quarter was $260.7 million and the free cash flow was $195.1 million.
Outlook
For fiscal 2024, Energizer expects organic revenues to be down roughly 2%. The company anticipates its adjusted EBITDA between $610 million and $620 million, with adjusted earnings per share between $3.20 and $3.30. It anticipates the gross margin to improve more than 150 bps year over year. The metric increased more than 100 basis points from its previous estimation, primarily due to incremental project momentum savings and improved input costs.
For the fiscal fourth quarter, organic revenues are expected to be flat and adjusted earnings per share are anticipated to be in the range of $1.10 to $1.20.
Project Momentum is on track with total savings likely to be in the band of $180-$200 million over the life of its program. Cash costs to accomplish savings are anticipated to be in the range of $150-$170 million. For fiscal 2024, expected savings from Project Momentum are pegged at $80-$90 million, with one-time cash costs in the range of $70-$80 million.
Shares of this Zacks Rank #4 (Sell) company have declined 7.8% in the past six months against the industry’s growth of 6.2%.
Some Better-Ranked Bets
Here, we have highlighted three better-ranked stocks, namely Vital Farms Inc. (VITL - Free Report) , Treehouse Foods, Inc. (THS - Free Report) and Kimberly-Clark Corporation (KMB - Free Report) .
Vital Farms, which offers a range of produced pasture-raised foods, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
VITL has a trailing four-quarter earnings surprise of 102.1%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year’s earnings and sales indicates growth of 66.1% and 24.9%, respectively, from the year-ago reported figures.
Treehouse Foods is a manufacturer of packaged foods and beverages. It presently carries a Zacks Rank #1. THS has a trailing four-quarter average earnings surprise of 25.1%.
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year earnings and sales indicates decline of 8.5% and 1.6%, respectively, from the year-ago reported figures.
Kimberly-Clark is principally engaged in the manufacture and marketing of a wide range of consumer products. It has a Zacks Rank of 2 (Buy) at present.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial-year earnings indicates growth of 9.7% from the year-ago reported figure. KMB has a trailing four-quarter average earnings surprise of 12.6%.