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Moody’s Gave Spectrum Brands’ Senior Unsecured Notes a B2 Rating

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SPB’s price movements

Spectrum Brands Holdings (SPB) has a market cap of $7.7 billion. It fell 2.0% to close at $124.68 per share on September 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -7.3%, -5.4%, and 23.4%, respectively, that day.

SPB is trading 5.2% below its 20-day moving average, 1.0% below its 50-day moving average, and 13.1% 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 2.6% on September 13, 2016.

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

  • Procter & Gamble (PG): $236.5 billion
  • Edgewell Personal Care (EPC): $4.6 billion
  • Masco (MAS): $11.5 billion

Latest news on SPB

Moody’s Investors Service has given Spectrum Brands’ 375 million euros senior unsecured notes due 2026 a B2 rating. It gave the company a “stable” outlook.

Moody’s also reported, “Net proceeds from the issuance, along with an incremental draw under the company’s $500 million revolving facility, will be used to fund the tender offer of its existing 6.375% $520 million of senior unsecured notes due November 2020, and for general corporate purposes. Moody’s will withdraw the existing B2 rating on the 2020 notes upon successful completion of the transaction.”

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Performance of Spectrum Brands in fiscal 3Q16

Spectrum Brands (SPB) reported fiscal 3Q16 net sales of $1.4 million, a rise of 9.1% from $1.3 million in fiscal 3Q15. Sales from the Global Batteries & Appliances and Global Pet Supplies segments fell 1.1% and 0.6%, respectively.

Sales from the Hardware & Home Improvement, Home & Garden, and Global Auto Care segments rose 4.8%, 4.8%, and 148.1%, respectively, between fiscal 3Q15 and fiscal 3Q16. The company’s gross profit margin and operating income rose 6.2% and 52.3%, respectively.

Net income, EPS, and cash

Spectrum Brands’ 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.

The company reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $279.2 million in fiscal 3Q16, a rise of 18.2% over fiscal 3Q15. SPB’s cash and cash equivalents fell 52.8%, and its inventory rose 7.9% between fiscal 4Q15 and fiscal 3Q16.

Projections

Spectrum Brands (SPB) made the following projections for fiscal 2016:

  • net sales increase in the high-single-digit range, including 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 of foreign exchange of 2.8%–3.0% based on current spot rates
  • free cash flows of $505 million–$515 million
  • capital expenditures of $100 million–$110 million

In the next part, we’ll take a look at Reynolds American (RAI).

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