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How Spectrum Brands’ Performance Improved in 3Q16

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Jul. 30 2016, Published 10:29 p.m. ET

Price movement

Spectrum Brands Holdings (SPB) has a market cap of $7.5 billion. It rose by 6.8% to close at $126.58 per share on July 28, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 8.4%, 10.5%, and 25.3%, respectively, on the same day.

SPB is trading 7.9% above its 20-day moving average, 8.0% above its 50-day moving average, and 21.5% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth (JKH) invests 0.22% of its holdings in Spectrum Brands. The ETF tracks a market-cap-weighted index of mid-cap companies selected by Morningstar based on their growth characteristics. The YTD price movement of JKH was 5.7% on July 28, 2016.

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

  • Procter & Gamble (PG): $228.0 billion
  • Edgewell Personal Care (EPC): $5.0 billion
  • Masco (MAS): $12.1 billion

Performance of Spectrum Brands in fiscal 3Q16

Spectrum Brands reported fiscal 3Q16 net sales of $1.4 million, a rise of 9.1% compared to net sales of $1.3 million in fiscal 3Q15. Sales of the global batteries & appliances and global pet supplies segments fell by 1.1% and 0.6%, respectively. Sales of the hardware & home improvement, home & garden, and global auto care segments rose by 4.8%, 4.8%, and 148.1%, respectively, in fiscal 3Q16 compared to fiscal 3Q15.

The company’s gross profit margin and operating income rose by 6.2% and 52.3%, respectively, in fiscal 3Q16 compared to the prior year period.

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Its net income and EPS (earnings per share) rose to $101.9 million and $1.71, respectively, in fiscal 3Q16 compared to $44.9 million and $0.79, respectively, in fiscal 3Q15. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $279.2 million in fiscal 3Q16, a rise of 18.2% compared to fiscal 3Q15.

SPB’s cash and cash equivalents fell by 52.8%, and its inventory rose by 7.9% in fiscal 3Q16 compared to fiscal 4Q15.

Quarterly dividend

Spectrum Brands has declared a quarterly dividend of $0.38 per share on its common stock. The dividend will be paid on September 13, 2016, to shareholders of record at the close of business on August 16, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • net sales to increase in the high-single-digit range, 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, and the negative impact from foreign exchange of ~2.8% to 3.0% based on current spot rates
  • free cash flow in the range of $505 million to $515 million
  • capital expenditures in the range of $100 million to $110 million

In the next part, we’ll take a look at Hershey (HSY).

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