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A Look at Spectrum Brands’ 4Q16 Performance

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Price movement

Spectrum Brands Holdings (SPB) fell 5.6% to close at $121.52 per share in the third week of November 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -5.6%, -9.5%, and 20.6%, respectively, as of November 18.

SPB is trading 8.3% below its 20-day moving average, 8.5% below its 50-day moving average, and 2.2% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth (JKH) invests 0.23% of its holdings in Spectrum Brands. The YTD price movement of JKH was 5.3% on November 18.

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

  • Procter & Gamble (PG): $222.3 billion
  • Masco (MAS): $10.6 billion
  • Edgewell Personal Care (EPC): $4.8 billion

Performance of Spectrum Brands in fiscal 4Q16

Spectrum Brands reported fiscal 4Q16 net sales of $1.25 billion, a fall of 4.5% compared to net sales of $1.31 billion in fiscal 4Q15. Sales of the company’s global batteries & appliances, hardware & home improvement, home & garden, and global pet supplies segments fell 6.0%, 1.0%, 12.9%, and 5.7%, respectively. Sales of the global auto care segment rose 4.8% in fiscal 4Q16 compared to fiscal 4Q15.

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The company’s gross profit margin and operating margin expanded 320 basis points and 240 basis points, respectively, in fiscal 4Q16 compared to the prior year’s period. Its gross margin rose due to a favorable mix and higher productivity, which were partially offset by an unfavorable foreign exchange.

Its net income and EPS (earnings per share) rose to $89.0 million and $1.49, respectively, in fiscal 4Q16 compared to $26.5 million and $0.44, respectively, in fiscal 4Q15. It reported adjusted EPS of $1.31 in fiscal 4Q16, a rise of 15.9% compared to fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, SPB reported net sales of $5.0 billion, a rise of 7.4% YoY (year-over-year). The company’s gross profit margin and operating margin expanded 250 basis points and 290 basis points, respectively, in fiscal 2016. The rise in gross margin was due to the acquisition of Global Auto Care (GAC) and a favorable mix, which were partially offset by an unfavorable foreign exchange.

Its net income and EPS rose to $357.1 million and $5.99, respectively, in fiscal 2016 compared to $148.9 million and $2.66, respectively, in fiscal 2015. The company reported adjusted EPS of $5.20 in fiscal 2016, a rise of 20.6% YoY.

SPB’s cash and cash equivalents rose 11.1%, and its inventories fell 5.1% in fiscal 2016. Its current ratio and debt-to-equity ratio fell to 1.5x and 2.8x, respectively, in fiscal 2016 compared to 1.6x and 3.5x, respectively, in fiscal 2015.

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Quarterly dividend

Spectrum Brands Holdings has declared a quarterly dividend of $0.38 per share on its common stock. The dividend will be paid on December 15, 2016, to shareholders of record at the close of business on November 30, 2016.

Projections

Spectrum Brands has made the following projections for fiscal 2017:

  • adjusted free cash flow of $575.0 million–$590.0 million
  • capital expenditure of $110.0 million–$120.0 million

For an ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.

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