Energizer Keeps Growing, Growing, Growing
Energizer Holdings, Inc (NYSE:ENR), the iconic maker of batteries and lighting products worldwide, is a growth story that has its beginnings long before the pandemic struck. Strategic initiatives and acquisitions had the company growing at a double-digit CAGR the pandemic only helped sustain. Since the 2nd quarter of last year, the company has seen revenue growth slow to about 1.5% and then rebound vigorously. The last two quarters, the fiscal 4th of 2020 and 1st of 2021, have YOY growth accelerating to +6% and the +15% with a very positive outlook for the rest of the year so the post-earnings release price action is a bit of a conundrum.
Energizer Marches Right Through The Consensus, Raises Guidance
Energizer Holdings had a very good quarter indeed with strength in all segments and operating regions. The company reported $848.6 million in quarterly revenue which is up 11% from the previous quarter and 15.2% from last year. The figure is also 740 basis points better than expected and supported by strong organic growth. The organic growth came in at 12.7% versus the 8.9% expected by the analysts and was further aided by favorable timing of shipments (2.2% of growth) and pricing (another 1% additions to the top line).
On a segment basis, the Americas regions saw its revenue grow by 14% with strength in both the batteries and automotivesegments. The International segment grew by nearly 18% and accounted for 30% of sales. Moving down the report, the company experienced a small decline in margins but much less than forecast. The 110 basis points reported beat the consensus by 90 bps and resulted in a 17.5% increase in adjusted EBITDA.
On the bottom line, the company’s adjusted and GAAP earnings were both strong. The adjusted earnings of $1.17 beat by $0.28 while the GAAP $0.91 is up 50% from last year and $0.08 better than expected. Looking forward, the company is expecting this strength to continue through the end of the year. The new EPS guidance is a range of $3.10 to $3.40 versus the $3.01 expected by the analysts which imply slowing growth as the comps get tougher but revenue growth in addition to the gains posted in the wake of the virus.
"As a result of the strong organic growth, improved operational execution, and the significant reduction in interest expense in the remainder of the year from our refinancing, we are raising our Adjusted earnings per share outlook for fiscal 2021. As we look ahead, we are squarely focused on driving the top-line momentum, executing with excellence, and improving our margins."
The Energizer Dividend, Getting Safer Every Day
Energizer Holdings took on some debt in recent years to fuel its growth strategy and it has been a burden. But the burden is getting lighter and lighter every day. Over the past quarter, the company not only paid down an additional $80 million but refinanced over $1 billion in loans for an annual $25 million in savings.
The takeaway is that the companies strong cash flow is becoming more and more available for buybacks and dividend increases. Energizer bought back over $21 million in shares during the quarter and continued to pay the $1.20 in dividends or about 2.45% in yield.
The Technical Outlook: Energizer Meets Resistance
Share of Energizer Holdings have been in a holding pattern since bottoming last year and almost broke out of the range post-earnings release. The bad news is that profit-takers and weak hands chose the pop to get out of the stock and drove price action back to where it came from. Now, with the indicators rolling over and a very strong bearish candle on the charts, it looks like a deeper correction may be coming. There may be support at the short-term moving average but, if it fails, a move down to the bottom of the range may be on the way.. If so, the stock would be trading about 12X its earnings and a deep-value.
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