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Why Did Moody’s Affirm Spectrum Brands’ Rating?

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Price movement

Spectrum Brands Holdings (SPB) has a market cap of $7.6 billion. It rose 2.8% to close at $124.93 per share on November 21, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.6%, -7.3%, and 24.0%, respectively, on the day.

SPB is trading 5.3% below its 20-day moving average, 5.9% below its 50-day moving average, and 5.0% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth Index ETF (JKH) invests 0.23% of its holdings in Spectrum Brands. The YTD price movement of JKH was 5.9% on November 21.

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

  • Procter & Gamble (PG) — $224.0 billion
  • Masco (MAS) — $10.6 billion
  • Edgewell Personal Care (EPC) — $4.8 billion

Latest news on SPB

In a press release on November 21, 2016, Moody’s reported, “Moody’s Investors Service (“Moody’s”) affirmed the ratings of Spectrum Brands, Inc. (“Spectrum”), including the B1 Corporate Family Rating [CFR], and changed the outlook to developing from positive. This follows the announcement last week that HRG Group, its majority shareholder, is evaluating strategic alternatives for HRG. HRG Group is in process of selling other assets that it owns, which will soon leave Spectrum as HRG’s only investment.”

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Performance of Spectrum Brands in fiscal 4Q16

Spectrum Brands reported fiscal 4Q16 net sales of $1.3 billion, a fall of 4.5% compared to its net sales of $1.3 billion in fiscal 4Q15. 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, partially offset by an unfavorable foreign exchange impact.

SPB’s 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 SPB’s gross margin was due to its acquisition of Global Auto Care (GAC) and its favorable mix, partially offset by an unfavorable foreign exchange impact.

SPB’s 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.

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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 its fiscal 2017:

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

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