Energizer Holdings, Inc.

ENR Details

Energizer Holdings, Inc. (NYSE: ENR), through its subsidiaries, is one of the largest manufacturers, marketers and distributors of household batteries, specialty batteries and lighting products in the world. Its brands such as Energizer and Eveready are marketed and sold around the world.

Result Performance – For the Third Quarter Ended 30 June 2021

•  Reported net sales of $721.8 million, up 9.7% YoY with organic growth of 5.8% YoY on the back of strong auto care sales growth globally.
• Gross margin percentage on a reported basis stood at 37.9% versus 40.0% in the prior year. The decrease in gross margin was led by higher manufacturing costs.
• Earnings per share stood at $0.24, inclusive of a $0.27 per share loss on extinguishment from debt refinancing, while adjusted earnings per share stood at $0.74 for Q3FY21, up 48% YoY
• Generated year-to-date cash flows from continuing operations of $17.5 million, versus $231.9 million in Q3FY20

Key Data (Source: Company Reports) 

Recent Updates

• On 11 August 2021, the company announced entering into an agreement to repurchase an aggregate of $75 million of its common stock in an accelerated share repurchase program with JPMorgan Chase, National Association (JPM).

Risks

The performance of the company could be impacted by the uncertain global economic and financial market conditions caused by the ongoing pandemic,  actions taken by customers, suppliers, other business partners, and governments.  Intense competition may slow down the ability to execute business strategy, achieve profitability, or maintain relationships with existing customers.

Outlook:

The company delivered a solid result for Q3FY21 on the back of strong execution across its business, and the benefits of synergies and reduced interest expense. Going forward, the strength of its brands, the breadth of its portfolio and the resilience of the organization will continue to drive sales and profitability.

For FY21, the company forecasts net sales growth in the range of 8-9%, driven by distribution gains, elevated demand, and favourable currency impacts. Adjusted gross margin is anticipated to decrease 80-110 basis points on YoY as inflationary cost pressures continue to increase. Adjusted free cash flow is anticipated to exceed $225 million. Further, the adjusted earnings per share are anticipated to be in the ambit of $3.30-$3.50 and Adjusted EBITDA of $620-$640 million.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period)

Stock Recommendation:

The stock declined by ~12.16% in 3 months. It is currently trading below the average 52-week high price of $52.8499 and 52-week low price of $38.375.

The stock has been valued using an EV/Sales multiple- based illustrative relative valuation method and a target price with a potential upside of  low double-digit (in percentage terms) has been arrived. The company might trade at a slight discount to its peers’ average, considering a lower asset turnover at 0.15x in Q3FY21 versus an industry median of 0.24x and a longer cash conversion cycle at 101.5 days in Q3FY21 versus an industry median of 67.7 days.

Considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of $38.70 per share, down by 2.69% on 7^th September 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.