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Spectrum Brands Launched New Heater with Increased Efficiency

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Price movement of Spectrum Brands

Spectrum Brands Holdings (SPB) has a market cap of $5.6 billion. SPB rose by 1.4% to close at $93.38 per share on February 17, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -2.1%, -1.2%, and -7.9%, respectively, as of that day.

Technically, the stock has broken support and is trading below all moving day averages. Currently, SPB is trading 0.24% below its 20-day moving average, 3.2% below its 50-day moving average, and 3.1 below its 200-day moving average.

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The iShares Morningstar Mid Core ETF (JKG) invests 0.18% of its holdings in Spectrum Brands. JKG tracks a market-cap-weighted index of US mid-cap firms that exhibit both growth and value characteristics as determined by multifactorial selection. The YTD price movement of JKG was -8.6% as of February 16, 2016.

The market caps of Spectrum Brands’ competitors are as follows:

  • The Procter & Gamble Company (PG)—$223.0 billion
  • Edgewell Personal Care Company (EPC)—$4.6 billion
  • Masco Corporation (MAS)—$9.2 billion

Tetrafauna brand launches new heater

Tetrafauna brand of Spectrum Brands—its Pet, Home & Garden division—announced its newly redesigned ReptoHeat Dual Temp Basking Heater to the consumer market. The improved ReptoHeat Dual Temp Basking Heater includes a patented design focused on advanced safety features and efficiency.

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Spectrum Brands’ performance in fiscal 1Q16

Spectrum Brands reported 1Q16 net sales of $1.21 billion, a rise of 14.1% compared to net sales of $1.06 billion in fiscal 1Q15. Sales from hardware and home improvement, global pet supplies, and home and garden segments rose by 4.2%, 68.7%, and 20.8%, respectively, and sales of global batteries and appliances fell by 4.0% in fiscal 1Q16 compared to sales in fiscal 1Q15. The company’s cost of goods sold as a percentage of net sales fell by 3.1%, and its operating income rose by 23.3% in fiscal 1Q16 compared to fiscal 1Q15.

Spectrum’s net income and EPS (earnings per share) rose to $73.6 million and $1.24, respectively, in fiscal 1Q16, compared to $49.8 million and $0.94, respectively, in fiscal 1Q15. Meanwhile, its trade receivables and inventory rose by 4.9% and 23.6%, respectively, in fiscal 1Q16 compared to fiscal 1Q15. It reported cash and cash equivalents of $162.0 million in fiscal 1Q16, compared to $408.4 million in fiscal 1Q15.

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The price-to-earnings and price-to-book value ratios of Spectrum Brands were 31.2x and 3.6x, respectively, as of February 17, 2016. But on January 28, 2016, the company declared a quarterly dividend of $0.38 per share on its common stock, a rise of 15.2% compared to the previous quarterly dividend of $0.33 per share.

Projection

The company has made the following projections for fiscal 2016:

  • net sales to increase in the high-single-digit range compared to fiscal 2015, which includes the positive impacts of the acquisitions of the European pet food business on December 31, 2014, Salix Animal Health on January 16, 2015, and Armored Auto Group on May 21, 2015 (including the negative impact from foreign exchange of ~2.0% to 2.2% on current spot rates)
  • free cash flow in the range of ~$505–$515 million.
  • capital expenditures in the range of $110–$120 million.

 In the next part of our series, we’ll analyze Coty.

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