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Piper Jaffray Rated Spectrum Brands Holdings as ‘Overweight’

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Price movement

Spectrum Brands Holdings (SPB) has a market cap of $8.0 billion. It fell by 0.55% to close at $133.46 per share on September 1, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.80%, 4.1%, and 32.1%, respectively, on the same day.

SPB is now trading 1.5% above its 20-day moving average, 7.6% above its 50-day moving average, and 22.5% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth Index Fund (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 5.3% on September 1.

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

  • Procter & Gamble (PG): $236.5 billion
  • Edgewell Personal Care (EPC): $4.7 billion
  • Masco (MAS): $11.8 billion

Spectrum Brands’ rating and performance in fiscal 3Q16

Piper Jaffray has initiated the coverage of Spectrum Brands Holdings with an “overweight” rating and set the stock price target at $147 per share.

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 from the Global Batteries & Appliances and Global Pet Supplies segments fell by 1.1% and 0.6%, respectively. Sales from Hardware & Home Improvement, Home & Garden, and Global Auto Care segments rose by 4.8%, 4.8%, and 148.1%, respectively, in fiscal 3Q16 over fiscal 3Q15.

The company’s gross profit margin and operating income rose by 6.2% and 52.3%, respectively, in fiscal 3Q16 over fiscal 3Q15.

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EPS and cash

The company’s net income and EPS (earnings per share) rose to $101.9 million and $1.71, respectively, in fiscal 3Q16, as 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, which represents a rise of 18.2% over fiscal 3Q15.

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

Projections

The company has 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 including the negative impact from foreign exchange of ~2.8%–3.0% based on current spot rates)
  • free cash flows in the range of $505 million–$515 million
  • capital expenditures in the range of $100 million–$110 million

In the next part, we’ll take a look at Fortune Brands Home & Security (FBHS).

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