Spectrum Brands Delivers Mixed Q4 Results

Home essentials provider Spectrum Brands Holdings, Inc. (SPB) reported mixed fourth-quarter results. The company’s earnings fell short of expectations, while sales exceeded expectations. SPB shares jumped 9.2% closing at $102.72 on November 12.

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Recently, the company announced a deal to sell its Hardware & Home Improvement (HHI) segment for $4.3 Billion in cash to ASSA ABLOY (ASAZY). Thus, all results discussed exclude the HHI segment financials, which are reported as discontinued operations.

Mixed Results

The company reported quarterly adjusted earnings of $0.38 per share, down 2.6% year-over-year, and 19 cents lower than analysts’ estimates of $0.57 per share.

Meanwhile, Q4 net sales came in at $757.8 million, growing 2.8% compared to the prior-year quarter, outpacing analysts’ estimates of $736.9 million.

Net sales for Home & Personal Care (HPC) and Global Pet Care (GPC) climbed 2.3% and 9.1%, respectively, against the same quarter last year, while Home & Garden (H&G) net sales declined 7.3%.

On an annual basis, adjusted earnings more than doubled to $2.88 per share, while net sales surged 14.3% to around $3 billion.

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Management Comments

David Maura, Chairman and CEO of SPB, said, “The decrease in shipping days as well as the ongoing pandemic related global supply chain disruptions adversely impacted our sales in the quarter. However, compared to the more normal operating environment of our fourth quarter of fiscal 2019, these results actually represent double-digit organic sales growth.”

Maura concluded, “We expect the current step-up in inflationary pressures to continue into FY22 and that the year-over-year impact will be more acute in the first half of the year. We have implemented price increases in fiscal 2021 and have put in place further price actions in the first half of this year to counter these headwinds.”

FY22 Outlook

Based on the current business environment, Spectrum Brands forecasts net sales to grow by mid to high single-digit year-over-year.The company also expects additional inflation in the range of $230 million to $250 million in FY22.

Analysts’ View

Responding to SPB’s quarterly performance, Deutsche Bank analyst Stephen Powers reiterated a Buy rating on the stock with a price target of $117, which implies 13.9% upside potential to current levels.

Overall, the stock has a Moderate Buy consensus rating based on 2 unanimous Buys. The average Spectrum Brands price target of $113 implies 10.01% upside potential to current levels. Shares have gained 58.1% over the past year.

Smart Score

According to TipRanks’ Smart Score system, Spectrum Brands gets a 8 out of 10, which indicates that the stock is likely to perform in line with market averages.