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Morgan Stanley Upgrades Energizer Holdings to ‘Overweight’

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Price movement

Energizer Holdings (ENR) has a market cap of $2.9 billion. It rose 3.1% to close at $46.01 per share on January 3, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.5%, 4.7%, and 3.1%, respectively, on the same day.

ENR is trading 3.8% above its 20-day moving average, 2.9% above its 50-day moving average, and 0.17% below its 200-day moving average.

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Related ETF and peers

The Schwab US Mid-Cap ETF (SCHM) invests 0.13% of its holdings in Energizer. The YTD price movement of SCHM was 0.51% on January 3.

The market caps of Energizer Holdings’s competitors are as follows:

  • Spectrum Brands Holdings (SPB) — $7.3 billion
  • HRG Group (HRG) — $3.1 billion

ENR’s rating

On January 3, 2017, Morgan Stanley upgraded Energizer Holdings’s rating from “equal-weight” to “overweight” and set the stock’s price target at $52.00 per share.

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Performance of Energizer Holdings in fiscal 4Q16

Energizer Holdings (ENR) reported fiscal 4Q16 net sales of $432.4 million, a rise of 8.3% compared to net sales of $399.1 million in fiscal 4Q15. This rise was due to its HandStands acquisition and partially offset by unfavorable foreign exchange. The company’s gross profit margin narrowed 260 basis points in fiscal 4Q16 compared to fiscal 4Q15.

Its net income and EPS (earnings per share) fell to $21.6 million and $0.34, respectively, in fiscal 4Q16 compared to $23.1 million and $0.37, respectively, in fiscal 4Q15. It reported adjusted EPS of $0.54 in fiscal 4Q16, a fall of 11.5% compared to fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, ENR reported net sales of $1.6 billion, a rise of 0.16% YoY (year-over-year). This rise in sales was due to the acquisition of HandStands and was partially offset by an unfavorable foreign exchange impact, deconsolidation of the Venezuela operations, and international go-to-market changes. The company’s gross profit margin narrowed 270 basis points in fiscal 2016.

ENR’s net income and EPS rose to $127.7 million and $2.04, respectively, in fiscal 2016 compared to -$4.0 million and -$0.06, respectively, in fiscal 2015. It reported adjusted EPS of $2.31 in fiscal 2016, a fall of 18.1% YoY.

Energizer’s cash and cash equivalents fell 42.8%, and its inventories rose 4.8% in fiscal 2016. Its current ratio fell to 1.7x in fiscal 2016 compared to 2.3x in fiscal 2015.

Projections

Energizer (ENR) made the following projections for fiscal 2017:

  • net sales growth in the mid-single digits
  • gross margin growth of 50–100 basis points due to productivity initiatives
  • adjusted EPS of $2.55–$2.75, which includes $0.15–$0.20 from the HandStands acquisition

Now, we’ll look at Hormel Foods (HRL).

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