Spectrum Brands (SPB) Third Quarter Profit Lag Estimates, Sales Beating – August 9, 2021


Spectrum Brands Holdings Inc. (SPB Free Report) reported the third quarter of fiscal 2021, in which net income missed Zacks’ consensus estimate, while sales beat the same. Both top and bottom results have improved year over year. Results achieved through greater investment in marketing and advertising as well as product launches. However, the high inflationary pressure, driven by the costs of transport and raw materials, has had a deterrent effect.

Over the past three months, shares of this company Zacks Rank # 3 (Hold) have lost 15.3% compared to the industry’s 18% decline.

Q3 in detail

Adjusted earnings from continuing operations of $ 1.57 per share was lower than Zacks’ consensus estimate of $ 1.59. However, net income was up 15.4% from $ 1.36 in the prior year quarter thanks to favorable volumes and productivity.

Spectrum Brands ‘net sales increased 18.1% year-on-year to $ 1,162.8 million and topped Zacks’ consensus estimate of $ 1,140 million. Excluding the positive currency effects and sales from buybacks, organic sales increased by 12%, driven by growth in the four segments, particularly in Hardware and Home Improvement. Sales also increased 13.8% from the third quarter of fiscal 2019. Favorable currency of $ 25.9 million and acquisition-related gains of $ 34.3 million also contributed to the growth quarterly sales.

Gross margin increased 16.8% year-on-year to $ 407.4 million, while gross margin contracted 40 basis points (bps) year-on-year to 35% due to high costs in the freight and raw materials, which were somewhat offset by higher volumes, a positive mix and improved productivity linked to the Global Productivity Improvement Program.

General and administrative expenses increased 22.5% to $ 275.4 million. As a percentage of sales, selling and administrative expenses increased 90 basis points to 23.7%. This may be primarily due to higher volumes as well as increased advertising and marketing costs and high incentive and distribution expenses.

The company reported operating profit of $ 98 million, up 3.6% year-over-year. The increase was driven by higher volumes, better productivity and lower restructuring costs, which more than offset higher freight and raw material costs as well as higher marketing and advertising investments.

Adjusted EBITDA from continuing operations increased 1.8% to $ 167.4 million in the third fiscal quarter, driven by strong organic growth in hardware and home improvement. The adjusted EBITDA margin contracted 230 basis points to 14.4%.

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Segment performances

Sales in the Hardware and home renovation The segment grew 48.8% to $ 419 million, mainly driven by double-digit growth in all categories, especially security, due to strong demand and product launches. Organic segment sales increased 46.7% year over year. In addition, Segment Adjusted EBITDA climbed 56% to $ 68 million thanks to higher volumes and better productivity, which more than offset COVID-related costs, freight and raw materials expenses. higher and increased marketing investments.

Sales in the Home and personal care The segment grew 9.5% to $ 274.4 million, supported by growth in small appliances, personal care, hair care and garment care products. Strength in Latin America as stores resumed operations also played a positive role. Excluding the positive effects of foreign currencies, organic revenue for the segment increased by 4.2%. Segment adjusted EBITDA of $ 11.8 million fell 52.8%, due to higher volumes and better productivity, which somewhat offset the price impacts, higher costs of transport and raw materials and increased marketing investments.

the Global Pet Care Segment sales increased 6.5% year-over-year to $ 257.3 million, primarily driven by gains from acquisitions which, in turn, fueled growth in the animals. Excluding favorable currency effects and sales from acquisitions, organic sales were down 7.2%. Segment Adjusted EBITDA decreased 2.8% to $ 49.2 million due to the transition of distribution centers, which resulted in sluggish volumes and higher operating costs.

the Home & Garden Segment sales increased 0.7% to $ 212 million, primarily driven by growth in repellents and gains from the sale of Rejuvenate, which closed on May 28 for around $ 300 million. On the other hand, adverse weather conditions acted as a headwind for herbicides and insecticides. Organic sales were down 3% year-on-year in the quarter under review. The segment’s adjusted EBITDA was $ 53.4 million, down 3.8% from $ 55.5 million in the prior year quarter.

Other finances

Spectrum Brands ended the quarter with cash and cash equivalents of $ 132.4 million, with outstanding debt of nearly $ 2,707 million. Management repurchased shares worth $ 10.2 million during the quarter under review. He has about $ 478 million under his $ 600 million cash revolver as of July 4, 2021. For fiscal 2021, capital spending is estimated to be between $ 70 million and $ 80 million. The company has over $ 600 million in cash.

Spectrum Brands Holdings Inc. Price, Consensus and BPA Surprise

Advice

Management maintained its 2021 vision. The company still anticipates sales growth in the mid-teens, driven by the favorable effects of foreign currencies. Adjusted EBITDA is expected to increase in mid-teens, with freight and freight costs of $ 120 million to $ 130 million. He expects adjusted free cash flow of $ 260 million to $ 280 million. Global Productivity Improvement Program savings are expected to reach $ 200 million by the end of fiscal 2022.

3 actions to consider

Gildan sportswear (GIL Free Report) has a long-term profit growth rate of 28.5%. The company currently has a Zacks Rank # 1 (strong buy). You can see The full list of today’s Zacks # 1 Rank stocks here.

Crocs (CROX Free Report) currently has an impressive long-term profit growth rate of 15% and a Zacks Rank # 1.

Whirlpool Company (RTH Free Report) currently has a Zacks Rank # 2 (Buy) and a long-term profit growth rate of 8.1%.


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